ICF International, Inc.
Annual Report 2022

Message from Chair, President and CEO John Wasson

2022 was an exciting and eventful year for the world and for ICF. As we stated last year, the COVID-19
pandemic had delayed our return to the office, and we did in fact return to the office in the fall of 2022 and
occupied our new HQ in Reston, VA even as we learned to operate in a new hybrid workplace model.
Regardless of workplace, ICF employees have continued providing the same innovative and dedicated
support and solutions to our clients, generating growth and profitability that helped establish 2022 as another
record-breaking year for the company’s revenue and earnings. Also contributing to those records were the
acquisition of SemanticBits in July 2022 and Blanton & Associates in September 2022. SemanticBits adds to
the acquisitions of ITG in 2020 and Creative Systems and Consulting in 2021, combined with the legacy
technology work long performed by ICF, to create what is now a market-leading technology powerhouse that
delivers tech solutions on a par with ICF’s long-standing domain expertise.

ICF’s continued alignment with current Administration priorities was further highlighted in 2022 as the
Inflation Reduction Act (IRA) was passed, representing the largest climate change-fighting piece of
legislation ever passed. The IRA’s collection of tax incentives and grant programs will accelerate the adoption
of clean energy and support the missions of many of ICF’s important clients in future years.

ICF
This year represented an important period in the implementation of our consistent long-term strategy.
continues to serve clients in the public and private sectors, bringing them valuable expertise which is
increasingly combined with technology and engagement solutions. ICF’s approximately 9,000 employees, in
offices throughout the US and worldwide, work every day to fulfill our purpose:

“To build a more prosperous and resilient world for all”

2022 Performance

2022 was another year of growth and success for ICF.

 Our gross revenue increased 14.6% to $1.78 billion, reflecting a mix of organic growth and service

revenue from the direct work of ICF employees, which increased 15.8% to $1.29 billion.

 We were awarded contracts valued at over $2.3 billion, a record for the Company, following a record-

breaking year in 2021.

 We delivered $3.38 in diluted GAAP earnings per share (EPS), down 9% from 2021, and $5.77 in

Non-GAAP EPS1, up 19.7% from 2021.

ICF remained focused on delivering value for our clients, opportunities for our people, and returns to our
shareholders in a changing world. ICF empowered government leaders across the world to transform how
services are delivered to their citizens, while also enabling business leaders to deliver greater efficiency and
improved value to their customers and stakeholders. Our performance in 2022 continued to show the benefit
of our approach to impact multiple markets.

 Our work for the U.S. federal government, as ICF continued to support many of the nation’s most
important civilian missions. ICF won significant awards of new business and numerous important
recompetes. Our capabilities have been augmented by the acquisition of SemanticBits, which brings
top-tier capabilities in open-source technology solutions and deep client relationships in the Centers
for Medicaid and Medicare Services (CMS) in the U.S. Department of Health and Human Services.

 Our work for U.S. state and local clients continues to support critical environmental needs, ranging
from environmental protection in transport infrastructure implementation to water infrastructure and
habitat protection. This work will be strengthened by our acquisition of Blanton & Associates, which
extended our environmental services portfolio in Texas and the Southwest. Our disaster management
business continues to support communities devastated by major hurricanes and wildfires as they
rebuild, and other communities seeking to mitigate disaster impacts before they occur.

 Our commercial energy business continued to grow as it accelerated its design and delivery of
innovative electrification, low-income, and demand-side management programs. Combining utility
expertise with cutting-edge analytics and innovative program design, our experts help utility customers
save money and help the energy system decarbonize and accelerate the clean energy transition.



ICF’s work for international clients was reduced, due primarily to the ending of a one-time pandemic-
related contract for a European government client in early 2022. European Union clients continued to
stabilize their operations in response to shifting COVID-19 pandemic impacts and the Russian invasion
of Ukraine.

 Our marketing and communications services, under our ICF Next brand, continued to support our
clients’ businesses and were recognized for their creativity and impact with SABRE awards. We have
also expanded our roster of leading hospitality clients for our loyalty services.

As mentioned above, in the 4th quarter we moved into our new headquarters in Reston, VA. The new location
provides a more energy-efficient building, with more modern space for collaboration amongst our teams and
their clients, and cost savings that support our bottom line. We plan to continue to take action to rationalize
our real estate footprint in the coming years.

1 Service Revenue and Non-GAAP EPS are non-GAAP measurements. A reconciliation of all non-GAAP measurements
to the most applicable GAAP number can be found beginning on Page 44 of the Company’s Annual Report on Form 10-
K for the year ended December 31, 2022, filed with the U.S. Securities and Exchange Commission on March 1, 2023.
The presentation of non-GAAP measurements may not be comparable to other similarly titled measures used by other
companies.

In 2021, the passage of the Infrastructure Investment and Jobs Act (IIJA) provided support for public
investment that could indirectly support and sustain some of ICF’s important markets. In 2022, the passage of
the IRA introduced wide-ranging tax credits and a variety of grant programs designed to speed the adoption of
low-carbon technologies. These programs do provide some direct opportunity for ICF support, but especially
provide impetus to the decarbonization of the US economy which generates opportunity indirectly as we
support those decarbonization efforts. These programs were among those we referred to last year when we
referenced the broader Build Back Better initiative. The IRA also supports the transformation of the U.S.
Department of the Treasury, where ICF has had success in driving digital modernization efforts.

Work That Makes Us Proud

ICF is proud of the work we do. While the breadth of our client services makes a comprehensive description
impossible here, below are a few ways we make a difference to our clients and to society:





ICF substantially grew our technology delivery capability to serve numerous clients around the U.S.
government. ICF solutions range from targeted applications for moderately-sized business processes
to large-scale digital transformation efforts reaching all corners of an agency’s operations. The fullest
expression of these efforts are the Digital Service Centers, where we support ongoing digital
transformation as a trusted partner for CIOs, e.g. in the National Cancer Institute and the U.S.
Department of Agriculture. We enable these clients to accelerate transformation of their legacy
processes by creating trust and applying multiple skillsets from information security to user
experience and design. We have delivered hundreds of individual applications inherently aligned with
our clients’ enterprise architectures.

ICF continues to enhance our work in support of the nation’s Public Health enterprise. Among many
other awards, in 2022 we won a contract to help a major Public Health client transition critical
systems to the cloud. We are also proud of our partnership with Morehouse School of Medicine –
together we crafted and delivered multiple COVID-19 communications campaigns designed
specifically for a variety of minority and disadvantaged communities, delivering critical health
messages benefitting these communities can trust and act on.

 Our disaster management business has been assisting Texans to return to their damaged homes.
We’ve been on the ground since January 2019, partnering with state and local officials to enable
home reconstruction or rehabilitation for those affected by Hurricane Harvey. We provide a range of
housing regulatory, project implementation, and program oversight assistance for more than $1.8
billion in housing rebuilding assistance. The programs we support include the Homeowner Assistance
Program, Local Buyout and Acquisition Program, and Homeowner Assistance and Reimbursement
Program.



ICF has worked for years in support of the U.S. Global Change Research Program (USGCRP), the
coordinating effort for all U.S. federal climate change research. This year that work included the
release for public comment of the Fifth National Climate Assessment, a comprehensive report which
integrates findings across the program and analyzes the current effects and trends of climate change in
and on natural and man-made systems. ICF experts also attended the COP27 conference to connect to
world leaders to continue to coordinate the fight against climate change with our counterparts across
the world.

 The combination of the Infrastructure Investment and Jobs Act, the Inflation Reduction Act, and new
U.S. federal policy has accelerated the deployment of new renewable electricity generation. ICF is on
the leading edge of this effort as we support the revolutionary deployment of offshore wind power
though our environmental services and energy advisory work. This work supports the build-out of
multiple offshore wind farms off the Atlantic coast as well as initial efforts to deploy floating offshore
wind on the Pacific coast, including the land-based infrastructure development that will be necessary
for those investments to come to fruition.





ICF has grown our work supporting utilities across North America as they work to manage demand
and advance their efforts to decarbonize the energy mix. This work includes managing innovative
pricing programs to encourage utility customers to use electricity during hours when the grid is least
stressed and electrification programs to accelerate the replacement of fossil fuel-powered machinery
and infrastructure with electrified replacements. Other efforts are helping utility clients install battery
storage devices that help lower costs and enhance overall grid reliability. A growing emphasis for
many of our utility clients is an effort to support low-income and disadvantaged customers who may
not be reached by traditional energy efficiency and other programs. ICF brings long-standing
expertise in working with these communities and we are excited by the possibilities unlocked by
getting them more involved in the energy transition.

In Europe, ICF has been proud to support the European Solidarity Corps, an initiative co-created with
young people, helping participants make the most out of their experience by offering a wide range of
learning opportunities targeted to young people aged 18-35 years. The training not only encourages
young people to participate in the Solidarity Corps, but to engage in their local communities and act
as multipliers of change. By focusing on key content such as active European citizenship, climate
change, intercultural learning, leadership, humanitarian aid, mental health – and much more – young
people can select the topics that interest them or follow a set learning journey, take part in quests,
reflection moments and exercises such as teamwork, public speaking, meditation and much more.

Environment, Social, and Governance (ESG) Commitment

Much of ICF’s ESG data, and explanations of how ICF employees contribute positively to our societies and
our world, can be found in our award-winning Corporate Citizenship Report published mid-year:
https://www.icf.com/company/about/corporate-citizenship. The Report also serves as the reporting vehicle for
data aligned to both the Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-
related Financial Disclosures (TCFD).

In 2022, ICF continued and extended our commitment to ESG principles. ICF’s corporate giving totaled
$787,000, driven by our employees’ choices of causes and their own donations; employees personally
volunteered thousands of hours and donated $671,000 to a variety of causes and philanthropic initiatives. Our
employees’ generosity is an inspiration and example for us all.

Each year ICF takes inventory of our carbon emissions. To sustain ICF’s 16-year commitment to carbon
neutrality in 2022, we purchased 100% net renewable electricity for U.S. operations via renewable energy
certificates that are Green-e® certified while mitigating the remainder of our Scope 1 and some Scope 3
emissions (including those from business travel and employee commuting, which are the three sources of
greatest impact) with high-quality offsets (including carbon removal). ICF continues to employ many

sustainability tactics such as reducing our real estate footprint, prioritizing leases in green buildings (notably
including our new HQ), providing online collaboration tools to reduce the need for business travel, and
promoting a commuter transit benefit. The 2023 Proxy Statement includes data showing ICF’s progress in
reducing emissions, both per employee and on an absolute basis.

ICF has long disclosed information concerning our carbon footprint through CDP (formerly the Carbon
Disclosure Project), and we have been pleased to have received a grade of “A/A-“ for several years running.
In 2022, we were grateful to be awarded an “A-“, demonstrating our continued excellence in reducing our
carbon footprint.

In 2022, ICF matured our Diversity, Equity, and Inclusion program. Our 8 Employee Community Networks
(ECNs) support under-represented communities (over 25% of our employees are involved in at least 1 ECN),
and in 2022 they held over 60 events on topics as wide-ranging as employee development, cultural expression,
talent acquisition, and charitable giving. We are proud to be recognized by Forbes in 2022 for being among
both the Best Employers for Diversity and for Women. ICF believes that fulfilling our purpose can only occur
if all ICFers are in an environment that allows them to do their best work and succeed without barriers.

We have also expanded our Diversity, Equity, and Inclusion efforts to have impact beyond ICF’s internal
operations. This year we appointed our first-ever Vice President of Equity and Inclusion for public sector
clients who ensures we view each client project through an equity lens and that we deliver outcome-oriented
solutions that help federal agencies better address the needs of underserved communities.

Our People

I am proud to stand alongside our entire team here at ICF. We are pleased to welcome all the new ICFers who
have joined us whether through individual recruiting or our acquisitions – I know they will be as committed as
the longest-standing ICFer in advancing our values and fulfilling our purpose. We are excited to be back in the
office while continuing to live our purpose and values every day to grow and expand value for our clients and
to benefit the world.

Wishing you all success in 2023, and continued health and safety for you and yours!

John Wasson

Chair, President and Chief Executive Officer

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-K

(Mark One)
☒

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

OR

☐☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From

to

Commission File Number: 001-33045
ICF INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
1902 Reston Metro Plaza
Reston, VA
(Address of principal executive offices)

22-3661438
(IRS Employer
Identification Number)

20190
(Zip Code)

Registrant’s telephone number, including area code:
(703) 934-3000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $0.001 par value

Trading Symbols(s)
ICFI

Name of each exchange on which registered
The NASDAQ Global Select Market

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant

to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was
required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting

company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer
Non-accelerated filer

☒ Accelerated filer
☐ Smaller reporting company
Emerging growth company

☐
☐
☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Ex-change Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of

its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public
accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based

compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of the last business

day of the Registrant’s most recently completed second fiscal quarter was approximately $1,741 million based upon the closing price per share of
$95.00, as quoted on the NASDAQ Global Select Market on June 30, 2022. Shares of the outstanding common stock held by each executive
officer and director have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.

As of February 24, 2023, 18,732,159 shares of the Registrant’s common stock, $0.001 par value, were outstanding.

List hereunder the following documents if incorporated by reference and the Part of the Form 10-K (e.g., Part I, Part II, etc.) into which the
document is incorporated: (1) Any annual report to security holders; (2) Any proxy or information statement; and (3) Any prospectus filed
pursuant to Rule 424(b) or (c) under the Securities Act of 1933. The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24, 1980).

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates information by reference from the Proxy Statement for the 2023 Annual Meeting of Stockholders expected to be

held in June 2023.

TABLE OF CONTENTS

PART I

ITEM 1. Business

ITEM 1A. Risk Factors

ITEM 1B. Unresolved Staff Comments

ITEM 2.

Properties

ITEM 3.

Legal Proceedings

ITEM 4. Mine Safety Disclosures

PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities

ITEM 6.

[Reserved]

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk

ITEM 8.

Financial Statements and Supplementary Data

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

ITEM 9A. Controls and Procedures

ITEM 9B. Other Information

ITEM 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections

PART III

ITEM 10. Directors, Executive Officers, and Corporate Governance

ITEM 11. Executive Compensation

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

ITEM 14. Principal Accountant Fees and Services

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

ITEM 16. Form 10-K Summary

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FORWARD-LOOKING STATEMENTS

Some of the statements in this Annual Report on Form 10-K constitute forward-looking statements as

defined in the Private Securities Litigation Reform Act of 1995, as amended. These statements involve
known and unknown risks, uncertainties, and other factors that may cause our actual results, levels of
activity, performance, or achievements to be materially different from any future results, levels of activity,
performance, or achievements expressed or implied by such forward-looking statements. In some cases,
you can identify these statements by forward-looking words such as “anticipate,” “believe,” “could,”
“estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “should,” “will,” “would,” or similar words.
You should read statements that contain these words carefully. The risk factors described in Item 1A of
Part I of this Annual Report on Form 10-K captioned “Risk Factors,” or otherwise described in our filings
with the Securities and Exchange Commission (“SEC”), as well as any cautionary language in this Annual
Report on Form 10-K, provide examples of risks, uncertainties, and events that may cause our actual results
to differ materially from the expectations we describe in our forward-looking statements, including, but not
limited to:

•

•

•

•

•

•

•

•

•

•

•

•

•

Our dependence on contracts with United States (“U.S.”) federal, state and local, and
international governments, agencies and departments for the majority of our revenue;

Changes in federal government budgeting and spending priorities;

Failure by Congress or other governmental bodies to approve budgets and debt ceiling
increases in a timely fashion and related reductions in government spending;

Failure of the current presidential administration (the “Administration”) and Congress to agree
on spending priorities, which may result in temporary shutdowns of non-essential federal
functions, including our work to support such functions;

Effects of the novel coronavirus disease (“COVID-19”), or any other future pandemic, and
related national, state and local government actions and reactions, on the health of our staff and
that of our clients, the continuity of our and our clients’ operations, our results of operations
and our outlook;

Results of routine and non-routine government audits and investigations;

Dependence of our commercial work on certain sectors of the global economy that are highly
cyclical;

Failure to realize the full amount of our backlog;

Risks inherent in being engaged in significant and complex disaster relief efforts and grants
management programs involving multiple tiers of government in very stressful environments;

Difficulties in integrating our acquisitions;

Risks resulting from expanding our service offerings and client base;

Acquisitions we undertake presenting integration challenges, failing to perform as expected,
increasing our liabilities, and/or reducing our earnings; and

Additional risks as a result of having international operations.

Our forward-looking statements are based on the beliefs and assumptions of our management and the
information available to our management at the time these statements were prepared. Although we believe
the expectations reflected in these statements are reasonable, we cannot guarantee future results, levels of
activity, performance, or achievements. You should not place undue reliance on these forward-looking
statements, which apply only as of the date of this Annual Report on Form 10-K. We undertake no
obligation to update these forward-looking statements, even if our situation changes in the future.

The terms “we,” “our,” “us,” and “the Company,” as used throughout this Annual Report on Form

10-K, refer to ICF International, Inc. and its consolidated subsidiaries, unless otherwise indicated. The term
“federal” or “federal government” refers to the U.S. federal government, and “state and local” or “state and
local government” refers to U.S. state (including U.S. territories) and local governments, unless otherwise
indicated.

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ITEM 1. BUSINESS

COMPANY OVERVIEW

PART I

ICF International, Inc. was formed in 1999 as a Delaware limited liability company under the name

ICF Consulting Group Holdings, LLC. It was formed to purchase our principal operating subsidiary, which
was founded in 1969, from a larger services organization. We converted to a Delaware corporation in 2003
and changed our name to ICF International, Inc. in 2006. We completed our initial public offering in
September 2006.

We provide professional services and technology-based solutions to government and commercial
clients, including management, marketing, technology, and policy consulting and implementation services.
We help our clients conceive, develop, implement, and improve solutions that address complex business,
natural resource, social, technological, and public safety issues. Our services primarily support clients that
operate in four key markets:

•

•

•

•

Energy, Environment, and Infrastructure;

Health, Education, and Social Programs;

Safety and Security; and

Consumer and Financial.

We provide services across these four markets that deliver value throughout the entire life cycle of a

policy, program, project, or initiative. Our primary services include:

•

•

•

•

•

Advisory Services. We research critical policy, industry, and stakeholder issues, trends, and
behavior. We measure and evaluate results and their impact and, based on those assessments,
provide strategic planning and advice to our clients on how to navigate societal, market,
business, communication, and technology challenges.

Program Implementation Services. We identify, define, and implement policies, plans,
programs, and business tools that make our clients’ organizations more effective and efficient.
Our comprehensive, end-to-end solutions are implemented through a wide range of standard
and customized methodologies designed to match our clients’ business context.

Analytics Services. We conduct survey research and collect and analyze wide varieties and
large volumes of data to understand critical issues and options for our clients and provide
actionable business intelligence. We provide information and data management solutions that
allow for integrated, purpose-driven data usage.

Digital Services. We design, develop, and implement cutting-edge technology systems and
business tools that are key to our clients’ mission or business performance, and include
solutions to optimize the customer and citizen experience for our clients. We provide
cybersecurity solutions that support the full range of cybersecurity missions and protect
evolving IT infrastructures in the face of relentless threats and modernize IT systems core to
our clients’ operations.

Engagement Services. We inform and engage our clients’ constituents, customers, and
employees to drive behavior and outcomes through public relations, branding and marketing,
multichannel and strategic communications, and reputation issues management. Our
engagement services frequently rely on our digital design and implementation skills, such as
web and app development.

We perform work for both government and commercial clients. Our government clients include U.S.

federal agencies, state and local governments, as well as governments outside the U.S. Our commercial
clients include both U.S. and international clients. Our clients utilize our services because we offer a
combination of deep subject matter expertise, technical solutions, and institutional experience which
contribute to our solutions being beneficial. We believe that our domain expertise and the program

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knowledge developed from our advisory engagements further position us to provide our full suite of
services.

We report operating results and financial data in one operating and reportable segment. We generated

revenue of $1,780.0 million, $1,553.0 million, and $1,506.9 million during the years ended December 31,
2022, 2021, and 2020, respectively. Our total backlog was approximately $3,856.2 million, $3,198.9
million, and $2,897.6 million at December 31, 2022, 2021, and 2020, respectively.

As of December 31, 2022, we had approximately 9,000 full and part-time employees around the

globe, including many recognized as thought leaders in their respective fields. We serve clients globally
from our headquarters in the Washington, D.C. metropolitan area, our 58 regional offices throughout the
U.S., and 24 offices outside the U.S., including offices in the United Kingdom (“U.K.”), Belgium, India,
China, and Canada.

OUR COMPANY INFORMATION

Our principal executive office is currently located at 1902 Reston Metro Plaza, Reston, Virginia
20190, and our telephone number is (703) 934-3000. We maintain an internet website at www.icf.com. We
make available our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on
Form 8-K, and amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), Code of Business and Ethics, and
other information related to us, free of charge, on this site as soon as reasonably practicable after we
electronically file those documents with, or otherwise furnish them to, the SEC. Our internet website and
the information contained therein or connected thereto are not intended to be incorporated into this Annual
Report on Form 10-K. The SEC also maintains an internet website that contains reports, proxy, and
information statements and other information regarding issuers that file electronically with the SEC at
http://www.sec.gov.

MARKET OPPORTUNITY, SERVICES, AND SOLUTIONS

Complex, long-term market factors, which include geopolitical, technological, environmental and
demographic trends, are changing the way people live and their priorities, and the way government and
industry operate and interact. We are all affected not only by the increasing breadth and invasiveness of
change, but also by its velocity. These factors have significant impacts on the markets in which our clients
operate.

In addition to these market-based factors, developments across all of our markets are increasing the
demand for advisory services that drive our business. These trends include increased government focus on
environmental initiatives; efficiency and mission performance management; generational changes; the
emphasis on transparency and accountability; and an increased demand for combining domain knowledge
of client missions and programs with innovative technology-enabled solutions. We see growth
opportunities for technology-based solutions involving analytics, digital services and strategic
communications across all of our markets.

We believe that demand for our services will continue as government, industry, and other
stakeholders seek to understand and respond to these and other factors. We expect that our government
clients will continue to utilize professional services firms with relevant domain expertise to assist with
designing new programs, enhancing existing ones, offering transformational solutions, and deploying
innovative information and communications technology. In addition, commercial organizations affected by
these programs will need to understand such changes, as well as their implications, in order for them to
plan appropriately. More broadly, we believe our commercial clients will demand innovative services and
solutions that can help them connect with customers and stakeholders in an increasingly connected and
crowded marketplace. We also see opportunities to further leverage our digital and client engagement
capabilities across our commercial and government client base. We believe that our institutional knowledge
and subject matter expertise are a distinct competitive advantage in providing our clients with practical,
innovative solutions, which are directly applicable to their mission or business, and deploying them quickly
with the right resources. Moreover, we believe we will be able to leverage the domain expertise and
program knowledge we have developed through advisory assignments and our experience with program
management, technology-based solutions, and engagement projects to win larger engagements, which

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generally lead to increasing returns on business development investment and promote higher employee
utilization. Rapid changes in technology, including the omnipresent influence of mobile, social, and cloud
technologies, also demand new ways of communicating, evaluating and implementing programs, and we
are focused on leveraging our expertise in technology to capitalize on those changes.

Our future results will depend on the success of our strategy to capitalize on our competitive
strengths, including our success in maintaining our long-standing client relationships, to seek larger
engagements across the program life cycle and to complete and successfully integrate strategic acquisitions.
We will continue to focus on: building scale in vertical and horizontal domain expertise; developing
business with both our government and commercial clients; and replicating our business model
geographically in selected regions of the world. In doing so, we will continue to evaluate strategic
acquisition opportunities that enhance our subject matter knowledge, broaden our service offerings, and/or
provide scale in specific markets and/or geographies.

Although we continue to see favorable long-term market opportunities, there are certain near-term

challenges facing all government service providers. Administrative and legislative actions by governments
to address changing priorities could have a negative impact on our business, which may result in a
reduction to our revenue and profit and adversely affect cash flow. Geopolitical factors could result in
changing government priorities. However, we believe we are well positioned to provide a broad range of
services in support of initiatives that will continue to be priorities to the U.S. federal government as well as
to state and local and international governments and commercial clients.

Energy, Environment, and Infrastructure

For decades, we have advised on energy and environmental issues, including the impact of human
activity on natural resources, and have helped develop solutions for infrastructure-related challenges. In
addition to addressing government policy and regulation in these areas, our work focuses on industries that
are affected by these policies and regulations, particularly those industries most heavily involved in the use
and delivery of energy. Significant factors affecting suppliers, users, and regulators of energy are driving
private and public sector demand for professional services firms, including:

•

•

•

•

•

•

Changing power markets, increasingly diverse sources of supply including distributed energy
resources and an increased demand for more carbon-free sources of energy and/or energy
storage;

The changing role of the U.S. in the world’s energy markets;

Ongoing efforts to upgrade energy infrastructure to meet new power, transmission,
environmental, and cybersecurity requirements and to enable more distributed forms of
generation;

Changing public policy, regulations, and incentives (including those established by the
Inflation Reduction Act) surrounding the modernization of and investment in an upgraded
energy infrastructure, including new business models that may accompany those changes;

The need to manage energy demand and increase efficient energy use in an era of
environmental concerns, especially regarding carbon and other emissions; and

The disruption of global energy markets and supplies, involving natural gas in particular, that
have emerged as a result of the invasion of Ukraine by Russia.

We assist energy enterprises worldwide in their efforts to analyze, develop, and implement strategies
related to their business operations and the interrelationships of those operations with the environment and
applicable government regulations. We utilize our policy expertise, deep industry knowledge, and
proprietary modeling tools to advise government and commercial clients on key topics related to electric
power, traditional fuels, and renewable sources of energy. Our areas of expertise include power market
analysis and modeling, transmissions analysis, flexible load and distribution system management, electric
system reliability standards, energy asset valuation and due diligence, regulatory and litigation support,
fuels market analysis, air regulatory strategy, and renewable energy and green power project
implementation.

6

We also assist commercial and government clients in designing, implementing, and evaluating
demand side management programs, both for residential and for commercial and industrial sectors. Utility
companies must balance the changing demand for energy with a price-sensitive, environmentally conscious
consumer base. We help utilities meet these needs, guiding them through the entire life cycle of energy
efficiency and related demand side management and electrification programs, including policy and
planning, determining technical requirements, and program implementation and improvement.

Carbon emissions have been an important focus of federal government regulation, international

governments, many state and local governments, and multinational corporations around the world.
Reducing or offsetting greenhouse gas (“GHG”) emissions continues to be the subject of both public and
private sector interest, and the regulatory landscape in this area is still evolving. The need to address carbon
and other harmful emissions has significantly changed the way the world’s governments and industries
interact and continues to be one of the drivers of interest in energy efficiency. Moreover, how government
and business adapt to the effects of climate change continues to be of global importance. We support
governments at the federal and state and local level, including providing comprehensive support to the
National Science and Technology Council’s Global Change Research Program. Additionally, we support
ministries and agencies of the government of the U.K. and European Commission, as well as commercial
clients, on these and related issues.

We also have decades of experience in designing, evaluating, and implementing environmental
policies and environmental compliance programs for energy, transportation (including aviation), and other
infrastructure projects. A number of key issues are driving increased demand for the services we provide in
these areas, including:

•

•

•

•

•

•

•

Increased focus on the proper stewardship of natural resources;

Changing precipitation patterns and drought that is affecting water infrastructure and
availability;

Aging water, energy, and transportation infrastructure, particularly in the U.S.;

The increasing exposure of infrastructure to damage and interference by severe weather events
influenced by a changing climate, and therefore the need to become more resilient to those
effects;

Past under-investment in transportation infrastructure that was recently the center of the
Infrastructure and Jobs Act passed by the Biden administration on November 15, 2021;

The increasing demand for businesses to respond to climate change and similar “ESG”
priorities being championed not only by the public sector, but also by investors, financing
sources, business organizations, and proxy advisory firms; and

Changing patterns of economic development that require transportation systems and energy
infrastructure to adapt to new patterns of demand.

By leveraging our interdisciplinary skills, which range from finance and economics to earth and life

sciences, information technology, and program management, we are able to provide a wide range of
services that include complex environmental impact assessments, environmental management information
systems, air quality assessments, program evaluation, transportation and aviation planning and operational
improvement, strategic communications, and regulatory reinvention. Our acquisition of Blanton &
Associates (“Blanton”) in September 2022 added to these skills and expanded our geographic reach. We
help clients deal specifically with the interrelated environmental, business, and social implications of issues
surrounding all transportation modes and infrastructure. From the environmental management of complex
infrastructure engagements to strategic and operational concerns of airlines and airports, our solutions draw
upon our expertise and institutional knowledge in transportation, urban and land use planning, industry
management practices, financial analysis, environmental sciences, and economics.

Health, Education, and Social Programs

We also apply our expertise across our full suite of services in the areas of health, education, and
social programs. We believe that a confluence of factors will drive an increased need for public and private
focus on these areas, including, among others:

•

Weaknesses in our public health and healthcare delivery systems exposed by COVID-19;

7

•

•

•

•

•

•

•

•

•

•

•

Expanded healthcare services to underserved portions of the population;

Rising healthcare expenditures, which require the evaluation of the effectiveness and efficiency
of current and new programs;

Rampant substance abuse and widespread social and health impacts of the opioid abuse
epidemic;

The emphasis on improving the effectiveness of the U.S. and other countries’ educational
systems;

The need to digitally transform and modernize the technology infrastructure underpinning
government operations;

The need for greater transparency and accountability of public sector programs;

A continued high need for social support systems, in part due to an aging population, and the
interrelated nature of health, housing, transportation, employment, and other social issues;

The need to prepare for and recover from natural disasters such as hurricanes, wildfires, and
earthquakes;

The perceived declining performance of the U.S. educational system compared to other
countries;

A changing regulatory environment; and

Military personnel returning home from active duty with health and social service needs.

We believe we are well positioned to provide our services to help our clients develop and manage

effective programs in the areas of health, education, and social programs at the international, regional,
national, and local levels. Our subject matter expertise includes public health, biomedical research,
healthcare quality, mental health, international health and development, health communications and
associated interactive technologies, education, child and family welfare needs, housing and communities,
and substance abuse. Our combination of domain knowledge and our experience in information
technology-based applications provides us with strong capabilities in health and social programs
informatics and analytics, which we believe will be of increasing importance as the need to manage
information grows. We partner with our clients in the government and commercial sectors to increase their
knowledge base, support program development, enhance program operations, evaluate program results, and
improve program effectiveness.

8

In the area of federal health, we support many agencies and programs within the U.S. Department of
Health and Human Services (“HHS”), including the National Institutes of Health (the “NIH”), the Centers
for Disease Control and Prevention (the “CDC”), and the Centers for Medicare and Medicaid Services
(“CMS”) by conducting primary data collection and analyses, assisting in designing, delivering and
evaluating programs, managing technical assistance centers, providing instructional systems, developing
information technology applications, and managing information clearinghouse operations. Our 2021
acquisition of ESAC brought a strong team with deep expertise in bioinformatics to further extend our
capabilities in this arena. Our 2022 acquisition of SemanticBits, LLC (“SemanticBits”) brought substantial
expertise in technology applications used in CMS to oversee healthcare quality. Increasingly, we provide
multichannel communications and messaging for public health programs using capabilities similar to those
used to provide marketing services to our commercial clients. We also provide training and technical
assistance for early care and educational programs (such as Head Start), and health and demographic
surveys in developing countries for the U.S. Department of State (the “DoS”). In the area of social
programs, we provide extensive training, technical assistance, and program analysis and support services
for a number of the housing and disaster recovery programs of the U.S. Department of Housing and Urban
Development (“HUD”) and state, territorial, and local governments. In addition, we provide research,
program design, evaluation, and training for educational initiatives at the federal and state level. We
provide similar services to a variety of U.K. ministries, as well as several Directorates-General of the
European Commission.

Across all of the areas described above, in Energy, Environment, and Infrastructure as well as Health

and Social Programs, we assist our clients in their growing efforts to ensure equity in their program
operations, whether it is with an environmental justice or a health equity focus or some other perspective
depending on the program being delivered.

Safety and Security

Safety and security programs continue to be a critical priority of the federal government, state and
local governments, international governments (especially in Europe), and in the commercial sector. We
believe we are positioned to meet the following key safety concerns:

•

•

•

•

•

•

•

•

Vulnerability of critical infrastructure to cyber and terrorist threats;

Increasing risks to enterprises’ reputations in the wake of a cyber-attack;

Broadened homeland security concerns that include areas such as health, food, energy, water,
and transportation;

Reassessment of the emergency management functions of homeland security in the face of
natural disasters;

Safety issues around crime and at-risk behavior;

Increased dependence on private sector personnel and organizations in emergency response;

The need to ensure that critical functions and sectors are resilient and able to recover quickly
after attacks or disasters in either the physical or cyber realms; and

The challenges resulting from changing global demographics.

These security concerns create demand for government programs that can identify, prevent, and

mitigate key cybersecurity issues and the societal issues they cause.

We believe that demand for our services will continue to grow as government, industry, and other

stakeholders seek to provide natural disaster relief and rebuild efforts and address ongoing homeland
security threats. In the wake of the major hurricanes (Ian, Harvey, Ida, Irma, Maria, Laura and Michael)
that devastated communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and
Puerto Rico, the affected areas remain in various stages of relief and recovery efforts. We believe our prior
experience with disaster relief and rebuild efforts, including after Hurricanes Katrina and Rita and
Superstorm Sandy, puts us in a favorable position to provide recovery and housing assistance, and
environmental and infrastructure solutions, including disaster mitigation, on behalf of federal departments
and agencies, state, territorial and local jurisdictions, and regional agencies.

9

In addition, the U.S. Department of Defense (“DoD”) is undergoing major transformations in its
approach to strategies, processes, organizational structures, and business practices due to several complex,
long-term factors, including:

•

•

•

•

The changing nature of global security threats, including cybersecurity threats;

Family issues associated with globally-deployed armed forces;

The increasing use of commercial cloud computing infrastructure and services to support the
DoD enterprise; and

The increasing need for real-time information sharing and the global nature of conflict arenas.

We provide key services to DoD, the U.S. Department of Homeland Security (“DHS”), the U.S.
Department of Justice (“DoJ”), and analogous Directorates-General at the European Commission. We
support DoD by providing high-end strategic planning, analysis, and technology-based solutions around
cybersecurity. We also provide the defense sector with critical infrastructure protection, environmental
management, human capital assessment, military community research, and technology-enabled solutions.

At the DHS, we assist in shaping and managing critical programs to ensure the safety of
communities, developing critical infrastructure protection plans and processes, establishing goals and
capabilities for national preparedness at all levels of government in the U.S., and managing the national
program to test radiological emergency preparedness at the state and local government levels in
communities adjacent to nuclear power facilities. At the DoJ, we provide technical and communications
assistance to programs that help victims of crime and at-risk youths. At the European Commission, we
provide support and analytical services related to justice and home affairs issues within the European
context.

Consumer and Financial

In the area of consumer and financial, some of the long-term market factors that we believe will have

an impact on our clients include:

•

•

•

•

Increased use of interactive digital technologies to link organizations with consumers and other
stakeholders in more varied and personalized ways, and less reliance on traditional print and
television marketing;

Changing industry structures in marketing and advertising services;

The desire for greater return on marketing investments; and

The continued elevation of data analytics as a business management and marketing tool, as
well as the concomitant growth of concerns about, and regulation of, data capture and
exploitation for marketing and other private and public sector purposes.

We combine our expertise in strategic communications, marketing and creative services, and public

relations with our strengths in interactive and mobile technologies to help companies develop stronger
relationships and engage with their customers and stakeholders across all channels, whether via traditional
or digital media, to drive better operating results. We took steps in 2022 to exit our traditional advertising
and marketing platform technology business lines and refocus on the core services of business
transformation, loyalty, and integrated communications across several key verticals. Target customer areas
include airlines, airports, electric and gas utilities, health care companies, transportation, travel, and
hospitality firms.

COMPETITIVE STRENGTHS

We possess the following key business strengths:

We have a highly-educated professional staff with deep subject matter knowledge

We possess strong intellectual capital that provides us with a deep understanding of policies,
processes, and programs across our clients’ markets. Our thought leadership is based on years of training,
experience, and education. We are able to apply our in-depth knowledge of our subject matter experts and
our experience developed over 45 years of providing advisory services to address the problems and issues
our clients are facing. As of December 31, 2022, approximately 41% of our benefits-eligible staff held
post-graduate degrees in diverse fields such as the social sciences, business and management, physical

10

sciences, public policy, human capital, information technology, mathematics, engineering, planning,
economics, life sciences, and law. These qualifications, and the complementary nature of our markets,
enable us to deploy multi-disciplinary teams to identify, develop, and implement solutions that are creative,
pragmatic, and tailored to our clients’ specific needs.

We believe our diverse range of client markets, services, and projects provides a stimulating work

environment for our employees that enhances their professional development. The use of multi-disciplinary
teams provides our staff with the opportunity to develop and refine common skills required in many types
of engagements. Our approach to managing people fosters collaboration and significant cross-utilization of
the skills and experience of both industry experts and other personnel who can develop creative solutions
by drawing on their different experiences. The types of services we provide, and the manner in which we
do so, enable us to attract and retain talented professionals from a variety of backgrounds while maintaining
a culture that fosters teamwork and excellence.

We have strong, long-standing relationships with clients across a diverse set of markets

The long-term relationships we maintain with many of our clients reflect our successful track record
of fulfilling our clients’ needs. We have advised the U.S. Environmental Protection Agency (“EPA”), the
United States Agency for International Development (“USAID”), and HHS for more than 30 years, the
U.S. Department of Energy (“DoE”) for more than 25 years, DoD for more than 20 years, certain
commercial clients in our energy markets for more than 20 years, the European Commission for more than
15 years, and we have multi-year relationships with many of our other clients in both our government and
commercial client base. We have numerous contacts at various levels within our clients’ organizations,
ranging from key decision-makers to functional managers. The long-standing nature and breadth of our
client relationships adds greatly to our institutional knowledge, which, in turn, helps us carry out our client
engagements more effectively and maintain and expand such relationships. Our extensive experience
working alongside our clients and client contacts, together with our prime contractor position on a
substantial majority of our contracts, gives us clearer visibility into future opportunities and emerging
requirements. We believe our balance between government civilian and defense agencies, our commercial
presence, and the diversity of markets in which our clients operate help mitigate the impact of policy or
political shifts, as well as annual shifts in our clients’ budgets and priorities.

Our advisory services position us to capture a full range of engagements

We believe our advisory approach, which is based on our subject matter expertise combined with an

understanding of our clients’ requirements and objectives, is a significant competitive differentiator that
helps us gain access to key client decision-makers during the initial phases of a policy, program, project, or
initiative. We use our expertise and understanding to formulate customized recommendations for our
clients. We believe this domain expertise and program knowledge, developed from our advisory
engagements, further positions us to provide a full suite of services across the entire life cycle of a
particular policy, program, project, or initiative. As a result, we are able to understand our clients’
requirements and objectives as they evolve over time. We then use this knowledge to provide continuous
improvement across our entire range of services, which maintains the relevance of our recommendations.

Our technology-enabled solutions are driven by our subject matter expertise and creativity

Government and commercial decision-makers have become increasingly aware that, to be effective,

technology-based solutions need to be seamlessly integrated with people and processes. We possess a
strong knowledge in information technology and a thorough understanding of organizational behavior and
human decision processes. In addition, as a result of our acquisitions of Incentive Technology Group, LLC
(“ITG”) in January 2020 and Creative Systems and Consulting (“Creative Systems”) in December 2021, we
have strong partnerships and experience in cloud-based technology platforms that are central to our federal
government clients’ technology modernization agendas. This combination of skills, along with our domain
knowledge, allows us to deliver technology-enabled solutions tailored to our clients’ business and
organizational needs with less start-up time required to understand client issues. In addition, many of our
clients seek to deploy cutting-edge solutions to communicate and transact with citizens, stakeholders, and
customers in a multichannel environment, and doing so takes both our constantly refreshed technical know-
how and world-class creativity.

Our proprietary tools, analytics and methods allow us to deliver superior solutions to our clients

We believe our innovative, and often proprietary, analytics and methods are key competitive
differentiators because they enhance our ability to deliver customized solutions to our clients and enable us
to deliver services in a more cost-effective manner than our competitors. For example, we have developed

11

industry-standard energy and environmental models that are used by governments and commercial entities
around the world for energy planning and air quality analyses and have also developed a suite of
proprietary climate change tools to help the private sector develop strategies for complying with GHG
emission reduction requirements. Our loyalty marketing services are often provided via our proprietary
Tally software, a software as a service offering. We maintain proprietary databases that we continually
refine and that are available to be incorporated quickly into our analyses on client engagements. In
addition, we also have proprietary program management methodologies and services that we believe can
help clients improve performance measurement, support chief information officer and science and
engineering program activities, and reduce security risks.

We are led by an experienced management team

Our management team, consisting of 283 officers with the title of vice president or higher, possesses

extensive industry experience and had an average tenure of 15.5 years with us as of December 31, 2022
(including prior service with companies we have acquired). This low turnover allows us to retain
institutional knowledge. Our managers are experienced both in marketing efforts and in successfully
managing and executing our key services. Our management team also has experience in acquiring other
businesses and integrating those operations with our own. A number of our managers are industry-
recognized thought leaders. We believe that our management’s successful past performance and deep
understanding of our clients’ needs have been and will continue to be differentiating factors in competitive
situations.

We have a broad global presence

We serve our clients with a global network of 58 regional offices throughout the U.S., and 24 offices

in key markets outside the U.S., including offices in the U.K., Belgium, India, and Canada. Our global
presence also gives us access to many of the leading experts on a variety of issues from around the world,
allowing us to expand our knowledge base and areas of functional expertise. Over the past year, we worked
in dozens of countries, helping government and commercial clients with energy, environment,
infrastructure, healthcare, marketing, interactive technology/e-commerce, and air transport matters.
Although international operations present challenges in the form of inconsistent legal systems, differing
levels of intellectual property protection, and trade regulation issues, we believe our international
operations will continue to play a significant role in our clients’ operations and in our platform.

STRATEGY

Our strategy to increase our revenue and shareholder value involves the following key elements:

Expand our commercial businesses

We plan to continue to pursue profitable commercial projects and we believe we have strong, global

client relationships in both the commercial energy and air transport markets. We continue to see growth
opportunities in our current commercial business in the utility sector, as well as significant potential to
expand our business in other commercial areas, such as aviation, tourism, digital marketing services and
strategic communications services, both domestically and internationally.

We view the energy industry as a particularly attractive sector for us over the next decade due to
concerns over controlling energy costs and limiting climate and environmental impacts, increased state and
federal regulation, the need for cleaner and more diverse sources of energy, and the concomitant need for
infrastructure to transport/transmit, store, and/or convert those new energy sources. We also believe the
combination of our vertical domain expertise with our digital marketing expertise makes us a provider of
choice for high value-added assignments in that arena. Although we believe the utility industry will
continue to be a strong market for advisory services, particularly in light of the changing focus on
regulatory actions and alternative energy sources, we intend to leverage our existing relationships and
institutional expertise to pursue and capture additional, and typically higher-margin, opportunities. For
example, we believe we can continue to expand our program and technology-based services in areas such
as assisting with the implementation of energy efficiency programs, electrification and decarbonization
initiatives, information technology applications, and environmental management services for larger
utilities. The growth of interest in sustainability and energy efficiency issues has created opportunities to
offer these types of services to new clients beyond our traditional sectors. We believe these factors, coupled

12

with our expansive national and global footprint, will result in a greater number of engagements that will
also be larger in size and scope.

We expect that interest in energy advisory services will continue to expand as clients in a number of

industries, including information service providers and companies engaged in travel and tourism, seek to
better understand their energy consumption options and the positive benefits of demonstrating
environmental stewardship. Our broad range of services to the aviation industry makes us well positioned
to capitalize on significant industry changes, including recovery from COVID-19-induced demand shocks;
substantial airline equipment upgrades to newer, more efficient aircraft models in a cost-constrained
environment; testing and adoption of Sustainable Aviation Fuels (“SAF”); and changes to airport business
models and strategy as they place increasing importance on passenger experience.

Our engagement services, including marketing and strategic communications offerings, are well-
positioned to support the continuing growth of multichannel engagement and e-commerce. We deliver
cutting-edge digital strategy support, as well as creative services, that help brands, products, and services
succeed in a crowded marketplace.

Replicate our business model across government and industry in selected geographies

We believe the services we provide to our energy, environment, and infrastructure market have
strong growth potential in selected geographies. Our domain expertise is well suited in Europe to meet the
need for cutting-edge climate change, energy, and environmental solutions, particularly with our offerings
to the U.K. government and European Commission. We have also focused our geographic footprint, when
prudent, by selectively closing or reducing the size of offices which appear to be unlikely to generate
profitable growth in the near to medium term, generally in nations or regions undergoing either economic
or political challenges.

Strengthen our technology-based offerings

We continue to strengthen our services in the fields of content and customer relationship
management, loyalty marketing, and end-to-end e-commerce. In early 2020 we acquired ITG, which
materially increased our skills and market presence in IT modernization, including the use of popular
cloud-based platforms to modernize legacy IT systems. In December 2021, we followed with the
acquisition of Creative Systems, further extending our cloud platform and open-source technology
implementation skills. In 2022, we acquired SemanticBits, a leading provider of cloud-native open-source
technology systems with a strong client position in CMS. We are positioned to increase these services by
expanding the technological underpinnings of our business, while bringing cloud, business process
automation, data management and analytics offerings to our clients to better link them with citizens,
consumers, and other stakeholders.

Leverage advisory work into full life cycle solutions

We plan to continue to leverage our advisory services and strong client relationships to increase our
revenue by winning longer-term engagements. These engagements could include: information services and
technology-based solutions; project and program management; business process solutions; marketing and
communications delivery; strategic communications; and technical assistance and training. Our advisory
services provide us with insight and understanding of our clients’ missions and goals. We believe the
domain expertise and program knowledge we develop from these advisory assignments position us to
capture a greater portion of the resulting larger engagements. However, we will need to undertake such
expansion carefully to avoid actual, potential, and perceived conflicts of interest.

Defend, expand, and deepen our presence in core U.S. federal and state and local government
markets

Changing and somewhat unpredictable political priorities at the U.S. federal, state, and local

government levels have created challenging market conditions for all competitors in the government
services sector. However, we believe that the Biden administration provides renewed opportunities for
growth in many of the government mission areas, such as efforts to address infrastructure issues with the
passing of the Infrastructure Investment and Jobs Act in 2021, where we have expertise and long-standing
relationships. We will focus not only on defending our current market footprint, but also on innovating to
continue expanding across key growth markets, such as U.S. federal government energy and climate-

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related programs, reengineering of U.S. public health and research efforts, and cybersecurity initiatives,
digital services, and disaster recovery work for state and local governments. We will continue to provide
innovative solutions that help our public sector clients do more with less. We will specifically target deeper
penetration of those agencies that currently procure services only from one or two of our service areas, and
our recent acquisitions of ITG, Creative Systems, SemanticBits, and Blanton, which provide us with strong
skills and market presence in technology modernization, will provide additional capabilities in this effort.
We believe we can leverage many of our long-term client relationships by introducing these existing
clients, where appropriate, to our other services in order to better meet their needs. For example, we
introduce many of our advisory clients to our capabilities to provide associated information technology,
cybersecurity, large-scale program management, and strategic communications and digital services. We can
also offer clients our extensive performance measurement, program evaluation, and performance
management services. Finally, having 58 offices across the U.S. allows us to focus more of our business
development efforts on addressing the needs of U.S. federal and state and local government agencies with
operations outside of the Washington, D.C. metropolitan area.

Pursue larger prime contract opportunities

We believe that continuing to expand our client engagements into services we offer as part of our
end-to-end client solutions enables us to pursue larger prime contract opportunities, which should provide a
greater return on our business development efforts and allow for increased employee utilization. We plan to
continue to target larger and longer-term opportunities through greater emphasis on early identification of
opportunities, strategic capture and positioning, and enhanced brand recognition. We believe that the
resulting increase in the scale, scope, and duration of our contracts will help us continue to grow our
business.

Pursue strategic acquisitions

We plan to augment our organic growth with selective, strategic acquisitions when the target
company will enable us to obtain new clients, increase our presence in attractive markets, and/or obtain
capabilities that complement our existing portfolio of services, gain access to customer contracts, provided
that the target company has cultural compatibility and we expect that the acquisition will have a positive
financial impact. Our acquisitions of Blanton and SemanticBits in 2022 are examples of this approach.

These elements of our strategy permeate all of the Company and influence our day-to-day decisions.

We believe that, collectively, they support the overall long-term growth of the organization.

CLIENT AND CONTRACT MIX

Government clients (including U.S. federal, state and local, as well as international, governments)

accounted for approximately 76%, 71%, and 65% of our 2022, 2021, and 2020 revenue, respectively.
Commercial clients (including U.S. and international clients) accounted for approximately 24%, 29%, and
35% of our 2022, 2021, and 2020 revenue, respectively. Our clients span a broad range of civilian and
defense agencies and commercial enterprises. Commercial clients include non-profit organizations and
universities, while government clients include the World Bank and the United Nations. In general, a client
is considered to be a government client if its primary funding is from a government agency or institution. If
we are a subcontractor, we classify the revenue based on the nature of the ultimate client receiving the
services.

In fiscal years 2022, 2021, and 2020, our largest three government clients by revenue were HHS,

DoS, and DoD. The percentage of our total revenue from the government clients are as follows:

Department of Health and Human Services
Department of State
Department of Defense
Total

2022

Year ended December 31,
2021

2020

23%
6%
4%
33%

20%
5%
5%
30%

17%
5%
6%
28%

There were no commercial clients with revenue equal to or greater than two, two, and six percent of

our total revenue for the fiscal years 2022, 2021, or 2020, respectively.

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Most of our revenue is derived from prime contracts in which we work directly for the end customer,

which accounted for approximately 91%, 91%, and 92% of our revenue for 2022, 2021, and 2020,
respectively.

Our contract periods typically extend from one month to five years, including option periods. Many
of our government contracts provide for option periods that may be exercised by the client. In 2022, 2021,
and 2020, no single contract accounted for more than 3%, 2%, and 5% of our revenue for those years,
respectively. Our 10 largest contracts by revenue collectively accounted for approximately 15%, 14%, and
19% of our revenue in 2022, 2021, and 2020, respectively.

International revenues (both government and commercial) decreased by $35.4 million to $174.5

million for the year ended December 31, 2022 compared to $209.9 million for the year ended
December 31, 2021. This decrease was primarily the result of the completion of a one-time contract for an
international government client.

CONTRACT BACKLOG

We define total backlog as the future revenue we expect to receive from our contracts and other
engagements. We generally include in our total backlog the estimated revenue represented by contract
options that have been priced, but not exercised. We do not include any estimate of revenue relating to
potential future delivery orders that might be awarded under our U.S. General Services Administration
Multiple Award Schedule (“GSA Schedule”) contracts, other Indefinite Delivery/Indefinite Quantity
(“IDIQ”) contracts, Master Service Agreements (“MSAs”), or other contract vehicles that are also held by a
large number of firms and under which potential future delivery orders or task orders might be issued by
any of a large number of different agencies, and are likely to be subject to a competitive bidding process.
We do, however, include potential future work expected to be awarded under IDIQ contracts that are
available to be utilized by a limited number of potential clients and are held either by us alone or by a
limited number of firms.

We include expected revenue in funded backlog when we have been authorized by the client to
proceed under a contract up to the dollar amount specified by our client, and this amount will be owed to us
under the contract after we provide the services pursuant to the authorization. If we do not provide services
authorized by a client prior to the expiration of the authorization, we remove amounts corresponding to the
expired authorization from funded backlog. We do include expected revenue under an engagement in
funded backlog when we do not have a signed contract, but only in situations when we have received client
authorization to begin or continue work and we expect to sign a contract for the engagement. In this case,
the amount of funded backlog is limited to the amount authorized. Our funded backlog does not represent
the full revenue potential of our contracts because many government clients, and sometimes other clients,
authorize work under a particular contract on a yearly or more frequent basis, even though the contract may
extend over several years. Most of the services we provide to commercial clients are provided under fully
funded contracts and task orders under MSAs. As a consequence, our backlog attributable to these clients is
typically reflected in funded backlog and not in unfunded backlog.

We define unfunded backlog as the difference between total backlog and funded backlog. Our
estimate of unfunded backlog for a particular contract is based, to a large extent, on the amount of revenue
we have recently recognized on the particular contract under the assumption that future utilization will be
similar, our past experience in utilizing contract capacity on similar types of contracts, and our professional
judgment. Accordingly, if contract utilization is different from our expectations, the revenue eventually
earned on a contract may be lower or higher than that implied by our estimate at a point in time or during
the life of a contract, of total backlog, including unfunded backlog. Although we expect our total backlog to
result in revenue, the timing of revenue associated with both funded and unfunded backlog will vary based
on a number of factors, and we may not recognize revenue associated with a particular component of
backlog when anticipated, or at all. Our government clients generally have the right to cancel any contract,
or ongoing or planned work under any contract, at any time. In addition, there can be no assurance that
revenue from funded or unfunded backlog will have similar profitability to previous work or will be
profitable at all. Generally speaking, we believe the risk that a particular component of backlog will not
result in future revenue is higher for unfunded backlog than for funded backlog.

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Our funded and estimates of unfunded and total backlog were as follows at December 31:

2022

2021
(in millions)

2020

Funded
Unfunded
Total backlog

$

$

1,786.9
2,069.3
3,856.2

$

$

1,593.5
1,605.4
3,198.9

$

$

1,522.3
1,375.3
2,897.6

There were no awards included in our 2022, 2021 or 2020 backlog amounts that were under protest.

BUSINESS DEVELOPMENT

Our business development efforts are critical to our organic growth. Our business development

processes and systems are designed to enable agility and speed-to-market over the business development
life cycle, especially given the distinctions between commercial and government clients. Business
development efforts in priority market areas, which include some of our largest federal agency accounts
(HHS, DoS, DoE, U.S. Department of Transportation, and EPA), are executed through account teams. Each
team participates in regular executive reviews of marketing plans and proposal development processes. Our
non-federal government clients are served by account leaders from operating units and coordinated by
senior executives with industry experience where such coordination is deemed appropriate to enhance our
business development success. This account-based approach allows deep insight into the needs of current
and future clients. It also helps us anticipate our clients’ evolving requirements over the coming 12 to 18
months and position ourselves to meet those requirements. Each administrative group is responsible for
maximizing sales in our existing accounts and finding opportunities in closely-related accounts.

The corporate business development function also includes a market research and competitive
intelligence group, a proposal group, and a strategic capture unit. The marketing function engages in brand
marketing and strategic marketing program development and execution to raise awareness of our services
and solutions across our markets, and to generate leads for further pursuit by sales personnel. The
marketing function also executes corporate communications campaigns to support specific lines of
business. Our contracts and administration function supports bid price development in partnership with the
business development account teams.

COMPETITION

We operate in a highly competitive and fragmented marketplace and compete against a number of

firms in each of our clients’ key markets. Some of our principal competitors include: Abt Associates Inc.;
AECOM Technology Corporation; Booz Allen Hamilton Holding Corporation; CACI International Inc.;
Cambridge Systematics, Inc.; CRA International, Inc.; Deloitte LLP; Eastern Research Group, Inc.; Cardno
ENTRIX, Inc.; Guidehouse; Leidos Holdings, Inc.; Northrop Grumman Corporation; Omnicom Group Inc.;
PA Consulting Group; Publicis Group; Science Applications International Corporation; Research Triangle
Institute; Tetra Tech Inc.; Westat, Inc., and WPP Plc. In addition, we have numerous smaller competitors,
many of which have narrower service offerings and serve niche markets. Some of our competitors are
significantly larger than we are and have greater access to resources and stronger brand recognition than we
do.

We consider our principal competitive advantages to be long-standing client relationships, the good

reputation and past performance of the firm, client references, the technical knowledge and industry
expertise of our employees, the quality of our services and solutions, the scope and scale of our service
offerings, and pricing.

INTELLECTUAL PROPERTY

We own a number of trademarks and copyrights, and internally-developed software that helps
maintain our business and competitive position. Sales and licenses of our intellectual property do not
currently comprise a substantial portion of our revenue or profit. We rely on the technology and models,
proprietary processes, and other intellectual property we own or have the rights to use in our analyses and
other work we perform for our clients. We use this innovative, and often proprietary, software, analytical

16

models and tools throughout our service offerings. Our staff regularly maintains, updates, and improves
these software, models, and tools based on our corporate experience. In addition, we sometimes retain
limited rights in software applications we develop for clients. We use a variety of means to protect our
intellectual property.

HUMAN CAPITAL

As a professional and technology services and solutions company, our success depends substantially

on attracting, developing, and retaining a workforce that is highly qualified, provides excellent, effective
and efficient performance, and is reflective of the communities we serve. To support these objectives, our
human resources programs are designed to enable a high-performing, diverse workforce; develop those
persons to prepare them for critical roles; reward and support employees through pay, benefits and
perquisite programs that we believe are competitive; and evolve and invest in technology, tools, and
resources to enable employees at work.

We employ approximately 9,000 employees, 85% of whom are employed full-time. Historically, we

experience employee voluntary turnover that is consistently below industry benchmarks. For 2022, our
overall company turnover was 20.6%, and 17.4% when excluding our on-call staff. The results of our
employee engagement survey reinforced the strong culture that makes our employees want to stay and
grow a career here with us. We’re proud that 86% of respondents believe their values aligned with the
values of ICF and that 87% of respondents feel they have a flexible schedule that meets their personal
needs. Both of these results were a full 16% above the industry average.

Making our company a welcoming and professionally rewarding workplace for all is a fundamental

goal of our approach to diversity, equity, and inclusion. This year, we continued to grow our eight
Employee Community Networks (“ECNs”) to foster support, networking, mentoring, professional
development, community outreach, and business impact. Our Asian, Black, Diverse Abilities, First Nations
Indigenous People, Hispanic/Latinx, LGBTQIA+, Women, and Veterans ECNs provide forums for
employees and allies with similar characteristics, interests, and goals to connect. In the two years since
they’ve launched, we’re proud that about 25% of our employees participate in at least one ECN. We also
continued our history of gender equity with 55% of our employees self-identifying as female. Of our people
managers, 54% self-identify as female, and 39% of our executives self-identify as female. Within our U.S.
employees, 36% classify themselves as non-white with the largest classifications being 12% Asian and
11% Black.

We support our employees to achieve personal and career success. In 2022, we delivered customized,

blended digital and instructor-led programs to build leadership, diversity and inclusion, people
management, project management, client relationships, finance, technology, and innovation skills. We also
partner with industry leaders including LinkedIn Learning, Udemy, and Microsoft for digital learning in
self-paced programs. Our annual mentoring program, Mentor Connect, had its largest cohort in 2022 with
515 mentoring pairs. A key focus area this year was to continue building our pipeline of tomorrow’s
leaders. We expanded our leadership development curriculum and were able to triple our reach to emerging
leaders at various stages of their career.

Lastly, we enable our people to thrive physically and professionally, and encourage healthy lifestyles

with strong mental and physical health. We believe that when our employees are at their best, it impacts
how they engage at work, with their families, and their communities. This year we launched a wellbeing
platform, powered by Virgin Pulse. Nearly 40% of eligible employees are active on the platform, more than
triple the vendor’s benchmark for the first year of an implementation. We conducted four company-wide
challenges this year. One challenge resulted in participants taking over 47 million steps, equating to nearly
one loop around our globe.

REGULATION

We provide our services to U.S. federal, and state and local governments, as well as international
government clients, and we are therefore subject to certain laws and regulations. Our failure to comply with
the complex laws, rules, and regulations applicable to us could cause us to lose business and subject us to a
variety of penalties and sanctions. Additionally, we are subject to various routine and non-routine
governmental and other reviews, audits, and investigations, the results of which could affect our operating

17

results and also subject us to penalties and sanctions. See “Item 1A. Risk Factors — Compliance Risks” for
a more detailed description of the regulatory and compliance risks we face.

ITEM 1A. RISK FACTORS

The following discussion of “risk factors” sets forth some of the most material factors that may

adversely affect our business, operations, financial position or future financial performance, reputation
and/or value of our stock. This information should be read in conjunction with the description of our
business, Management’s Discussion and Analysis and the consolidated financial statements and related
notes contained in this Annual Report on Form 10-K. Because of the following factors, as well as other
factors, whether known or unknown, affecting our business, operations, financial position or future
financial performance, reputation and/or value of our stock, past financial performance should not be
considered to be a reliable indicator of future performance, and investors should not use historical trends to
anticipate results or trends in future periods.

GOVERNMENT BUDGETING AND SPENDING PRIORITIES RISKS

The failure of Congress to approve appropriations bills in a timely manner for the federal
government agencies and departments we support, or the failure of the Administration and Congress
to reach an agreement on fiscal issues, could delay and reduce spending, cause us to lose revenue and
profit, and affect our cash flow.

On an annual basis, Congress is required to approve appropriations bills that govern spending by

each of the federal government agencies and departments we support. When Congress is, or Congress and
the Administration are, unable to agree on budget priorities or specifics, and thus unable to pass annual
appropriations bills on a timely basis, Congress typically enacts a continuing resolution. Continuing
resolutions generally allow federal government agencies and departments to operate at spending levels
based on the previous fiscal year. When agencies and departments operate on the basis of a continuing
resolution, funding we expect to receive from clients for work we are already performing and for new
initiatives may be delayed or canceled. Congress and the Administration have from time to time failed to
agree on a continuing resolution, resulting in temporary shutdowns of non-essential federal government
functions and our work on such functions. Thus, the failure by Congress and the Administration to enact
appropriations bills in a timely manner can result in the loss of revenue and profit when federal government
agencies and departments are required to cancel or change existing or new initiatives or the deferral of
revenue and profit to later periods due to shutdowns or delays in implementing existing or new initiatives.
There is also the possibility that Congress will fail to raise the U.S. debt ceiling when necessary which, in
addition to resulting in federal government shutdowns, could significantly impact the U.S. and global
economy, affecting the discretionary spending decisions of our non-governmental clients and affecting the
capital markets and our access to related sources of liquidity on terms that are acceptable to us. The
delayed funding or shutdown of many parts of the federal government, including agencies, departments,
programs, and projects we support, could have a substantial negative affect on our revenue, profit, and cash
flows.

Budget compromises that may be needed for future fiscal years may continue to be extraordinarily

difficult given the complicated grassroots political environment, a closely divided Congress, an increasing
federal deficit and debt load, the continuing COVID-19 pandemic due to emerging variants, and a
challenged economy.

The budgets of many of our state and local government clients are also subject to similar divisions,

risks, and uncertainties as are inherent in the federal budget process.

Government spending priorities may change in a manner adverse to our business.

We derived approximately 55%, 47%, and 44% of our revenue in 2022, 2021, and 2020, respectively,

from contracts with federal government clients, and approximately 21%, 24%, and 21% of our revenue
from contracts with state and local governments and international governments in 2022, 2021, and 2020,
respectively. Expenditures by our federal government clients may be restricted or reduced by
Administration or Congressional actions, by action of the Office of Management and Budget, by action of
individual agencies or departments, or by other actions. In addition, many state and local governments are

18

not permitted to operate with budget deficits, and nearly all state and local governments face considerable
challenges in balancing their budgets. Accordingly, we expect that, due to changing government budgeting
and spending priorities, including necessary balancing of defense spending with civilian agency spending,
and related disputes among Congress and the Administration, some of our government clients in the future
may delay payments due to us, eventually fail to pay what they owe us, and/or delay certain programs and
projects. For some government clients, we may face a difficult choice: turn down (or stop) work due to
budget uncertainty with the risk of damaging a valuable client relationship or perform work with the risk of
not being paid in a timely fashion or perhaps at all. Federal, state and local government, and/or
international government elections could also affect spending priorities and budgets at all levels of
government. In addition, increased government deficits and debt, both domestic and international, may lead
to reduced spending by agencies and departments on projects or programs we support.

RISKS RELATED TO THE CHANGING BUSINESS ENVIRONMENT IN WHICH WE
OPERATE

As we develop new services, clients and practices, enter new lines of business, and focus more of our
business on providing a full range of client solutions, our operating risks increase.

As part of our corporate strategy, we are attempting to leverage our advisory services to sell our full

suite of services across the life cycle of a policy, program, project, or initiative and we are regularly
searching for ways to provide new services to clients. In addition, we plan to extend our services to new
clients, lines of business, and selected geographic locations, including outside the U.S., and to seek out
cross-border opportunities. As we focus more on our delivery of a full range of consulting services from
advisory through implementation and attempt to develop new services, clients, practice areas, and lines of
business, these efforts could be unsuccessful and adversely affect our results of operations.

Such growth efforts place substantial additional demands on our management and staff, as well as on

our information, financial, cash flow, and administrative and operational systems. We may not be able to
manage these demands successfully. Growth may require increased recruiting efforts, business
development, and selling, marketing and other actions that are expensive and increase risk. We may need to
invest more in our people and systems, controls, compliance efforts, policies, and procedures than we
anticipate. Further, we may need to enhance or modify our systems or processes, or transition to more
efficient or effective ones, and these changes and how we handle them may impact the business. Therefore,
even if we do grow, the demands on our people and systems, controls, compliance efforts, policies, and
procedures may adversely affect the quality of our work, our operating margins, and our operating results,
at least in the short-term, and perhaps in the long-term.

Efforts involving a different focus, new services, new clients, new practice areas, new lines of
business, and increasing internationalization include risks associated with our inexperience and competition
from mature participants in those areas. Our expansion of services may result in decisions that could harm
our profit and operating results. In particular, implementation and improvement services often relate to the
development, implementation, and improvement of critical infrastructure or operating systems that our
clients may view as “mission critical”. If we fail to satisfy the needs of our clients in providing these
services, we could incur reputational damage and clients could claim significant costs and losses for which
they could seek compensation from us.

RISKS RELATED TO THE GOVERNMENT CONTRACTS BUSINESS

Maintaining our client relationships and professional reputation is critical to our ability to
successfully win new contracts and renew expired contracts.

Our client relationships and professional reputation are key factors in maintaining and growing our

business, revenue, and profit levels under contracts with our clients. We continually bid for and execute
new contracts, and our existing contracts regularly become subject to re-competition and expiration. If we
are not able to replace the revenue from these contracts, either through follow-on contracts or new contracts
for those requirements or for other requirements, our revenue and operating results may be adversely
affected. On the expiration of a contract, we typically seek a new contract or subcontractor role relating to
that client to replace the revenue generated by the expired contract. There can be no assurance that those
expiring contracts we are servicing will continue after their expiration, that the client will re-procure those
requirements, that any such re-procurement will not be restricted in a way that would eliminate us from the

19

competition (e.g., set asides for small businesses), or that we will be successful in any such re-
procurements or in obtaining subcontractor roles. Any factor that diminishes client relationships and/or
professional reputation with federal, state and local, and international government clients, as well as
commercial clients, could make it substantially more difficult for us to compete successfully for new
engagements and qualified employees. To the extent our client relationships and/or professional reputation
deteriorate, our revenue and operating results could be adversely affected.

The diversity of the services we provide, and the clients we serve, may create actual, potential, and
perceived conflicts of interest and business conflicts that limit our growth and could lead to potential
liabilities for us.

Because we provide services to a wide array of both government and commercial clients, occasions

arise where, due to actual, potential, or perceived conflicts of interest or business conflicts, we cannot
perform work for which we are qualified. A number of our contracts contain limitations on the work we can
perform for others, for example, when we are assisting a government agency or department in developing
regulations or enforcement strategies. Actual, potential, and perceived conflicts limit the work we can do
and, consequently, can limit our opportunity for growth and adversely affect our operating results. In
addition, if we fail to address actual or potential conflicts properly, or even if we simply fail to recognize a
perceived conflict, we may be in violation of our existing contracts, may otherwise incur liability, may lose
future business for not preventing the conflict from arising, and our reputation may suffer. Particularly as
we continue to grow our commercial business, we anticipate that conflicts of interest and business conflicts
will pose a greater risk.

We derive significant revenue and profit from contracts awarded through a competitive bidding
process, which can impose substantial costs on us, and we will lose revenue and profit if we fail to
compete effectively.

We derive significant revenue and profit from contracts that are awarded through competitive bidding

processes. Competitive bidding imposes substantial costs and presents a number of risks, including the:

•

•

•

•

Substantial cost and managerial time and effort that we spend to prepare bids and proposals;

Need to estimate accurately the resources and costs that will be required to service any
contracts we are awarded, sometimes in advance of the final determination of their full scope;

Expense and delay that may arise if our competitors protest or challenge awards made to us
pursuant to competitive bidding, as discussed elsewhere; and

Opportunity cost of not bidding on and winning other contracts we may have otherwise
pursued.

To the extent we engage in competitive bidding and are unable to win particular contracts, we not

only incur substantial costs in the bidding process that negatively affect our operating results, but we may
lose the opportunity to operate in the market for the services provided under those contracts for a number of
years. Even if we win a particular contract through competitive bidding, our profit margins may be
depressed, or we may even suffer losses as a result of the costs incurred through the bidding process and
the need to lower our prices to overcome competition.

Our reliance on GSA Schedule and other IDIQ contracts creates the risk of volatility in our revenue
and profit levels.

We believe that one of the elements of our success is our position as a prime contractor under GSA
Schedule contracts and other IDIQ contracts, and we believe this position is important to our ability to sell
our services to federal government clients. However, these contract vehicles require us to compete for each
delivery order and task order, rather than having a more predictable stream of activity during the term of a
multi-year contract. In addition, we may spend considerable cost and managerial time and effort to prepare
bids and proposals for contracts, delivery orders or task orders that we may not win. There can be no
assurance that we will continue to obtain revenue from such contracts at current levels, or in any amount, in
the future. To the extent that federal government agencies and departments choose to employ GSA
Schedule contracts and other IDIQ contracts encompassing activities for which we are not able to compete
or provide services, we could lose business, which would negatively affect our revenue and profitability.

20

We may not receive revenue corresponding to the full amount of our backlog, or may receive it later
than we expect, which could adversely affect our revenue and operating results.

The calculation of backlog is highly subjective and conditioned on numerous uncertainties and
estimates, and there can be no assurance that we will in fact receive the amounts we have included in our
backlog. Our assessment of a contract’s potential value is based on factors such as the amount of revenue
we have recently recognized on that contract under the assumption that future utilization will be similar,
our experience in utilizing contract capacity on similar types of contracts, and our professional judgment. In
the case of contracts that may be renewed at the option of the client, we generally calculate backlog by
assuming that the client will exercise all of its renewal options; however, the client may elect not to do so.
In addition, federal government contracts rely on Congressional appropriation of funding, which is
typically provided only partially at any point during the term of federal government contracts, and all or
some of the work to be performed under a contract may require future appropriations by Congress and the
subsequent allocation of funding by the procuring agency or department to the contract.

Protests of contracts continue to be common in our industry. We do not include contract awards that
are subject to a pending protest in our calculation of backlog. If a contract previously included in backlog
becomes the subject of a protest, we would adjust backlog to remove that amount and reassess following
resolution of the protest.

Our estimate of the portion of backlog that we expect to recognize as revenue in any future period

may differ from actual results because the receipt and timing of this revenue often depends on subsequent
appropriation and allocation of funding and is subject to various contingencies, such as timing of task
orders and delivery orders, many of which are beyond our control. In addition, we may never receive
revenue from some of the engagements that are included in our backlog, and this risk is greater with respect
to unfunded backlog. Although we adjust our backlog to reflect modifications to or renewals of existing
contracts, awards of new contracts, or approvals of expenditures, if we subsequently fail to realize revenue
corresponding to our backlog, our revenue and operating results could be adversely affected.

Our contracts may contain provisions that are unfavorable to us and permit our clients to, among
other things, terminate our contracts partially or completely at any time prior to completion.

Our contracts may contain provisions that allow our clients to terminate or modify these contracts at

their convenience on short notice. If a client terminates one of our contracts for convenience, we should
only bill the client for work completed prior to the termination, plus any commitments and settlement
expenses that we may claim and the client agrees to pay, but not for any work not yet performed. In
addition, many of our government contracts and task and delivery orders are incrementally funded as
appropriated funds become available. The reduction or elimination of such funding can result in contract
options not being exercised and further work on existing contracts and orders being curtailed. In any such
event, we would have no right to seek lost fees or other damages. In addition, certain contracts with
international government clients may have more severe and/or different contract clauses than what we are
accustomed to with federal and state and local government clients, such as penalties for any delay in
performance. If a client were to terminate, decline to exercise options under, or curtail further performance
under one or more of our major contracts, our revenue and operating results could be adversely affected.

Our relationships with other contractors are important to our business and, if disrupted, could cause
us damage.

We derive a portion of our revenue from contracts under which we act as a subcontractor or from

“teaming” arrangements in which we and other contractors jointly bid on particular contracts, projects, or
programs. As a subcontractor or team member, we often lack control over fulfillment of a contract. Poor
performance on the contract, whether resulting from our performance or the performance of another
contractor, could tarnish our reputation, result in a reduction of the amount of our work under, or
termination of, that contract or other contracts, and cause us to not obtain future work, even when we
perform as required. Moreover, our revenue, profit and operating results could be adversely affected if any
prime contractor or teammate does not pay our invoices in a timely fashion, chooses to offer products or
services of the type that we provide, teams with other companies to provide such products or services, or
otherwise reduces its reliance upon us for such products or services.

21

PROFITABILITY RISKS

If we are unable to accurately estimate and control our contract costs, then we may incur losses on
our contracts, which could decrease our operating margins and reduce our profits. In particular, the
unpredictability of our earnings could increase on our fixed-price contracts if we cannot accurately
estimate and control our contract costs.

It is important for us to accurately estimate and control our contract costs and maintain positive
operating margins and profitability. As described elsewhere in this Form 10-K, we generally enter into
three principal types of contracts with our clients: fixed-price, time-and-materials and cost-based.

We derived 45%, 41%, and 35% of our revenue from fixed-price contracts in 2022, 2021, and 2020,
respectively. Under fixed-price contracts, we receive a fixed price irrespective of the actual costs we incur
and, consequently, we are exposed to a number of risks. We realize a profit on fixed-price contracts only if
we can control our costs and prevent cost overruns while also meeting contract requirements. Fixed-price
contracts require cost and scheduling estimates that are based on a number of assumptions, including those
about future economic conditions, costs, and availability of labor, equipment and materials, and other
exigencies. We could experience cost overruns if these estimates are inaccurate as a result of errors or
ambiguities in the contract specifications or if they become inaccurate as a result of a change in
circumstances following the submission of the estimate due to, among other things, unanticipated technical
problems, difficulties in obtaining permits or approvals, changes in local laws or labor conditions, weather
delays, or the inability of our vendors or subcontractors to perform. If cost overruns occur, we could
experience reduced profits or, in some cases, a loss for that project. If a project is significant, or if there are
one or more common issues that impact multiple projects, cost overruns could increase the unpredictability
of our earnings, as well as have an adverse impact on our business and earnings.

Certain lines of business of our commercial work depend on certain sectors of the global economy
that are highly cyclical, which can lead to substantial variations in our revenue and profit from
period to period.

Our commercial clients, which include clients outside the U.S., generated approximately 24%, 29%,

and 35% of our revenue in 2022, 2021, and 2020, respectively. This reliance on commercial clients
presents certain risks and challenges. For example, our commercial work is heavily concentrated in
industries which can be cyclical, such as: energy, air transportation, and environmental services. Demand
for our services from our commercial clients has historically declined when their industries have
experienced downturns, and we expect a decline in demand for our services when these industries or their
customer bases experience downturns in the future.

Our efforts to become involved in engagements that are greater in terms of size, scope and
performance demands may result in increased performance and credit risk.

As we expand our national and global footprint, we may become involved in a greater number of

engagements that will be larger in size and scope and more international. The increase in size and scope of
the engagements in which we become involved in subjects us to the potential for a larger impact of
performance risk associated with larger and more challenging engagements and the credit risk associated
with certain larger customers, particularly among our commercial non-U.S. government and non-federal
U.S. government clients. Our customers may face unexpected circumstances that adversely impact their
ability to pay their trade payables to us and we may face unexpected borrowing needs or losses as a result.
Such circumstances could lead to our commercial customers filing for bankruptcy. This can ultimately lead
to variations in our profit from period to period. We monitor the aging of receivables regularly and make
assessments of the ability of customers to pay amounts due.

Our business could be adversely affected by delays caused by our competitors protesting contract
awards received by us, which could stop our work. Likewise, we may protest the contracts awarded

22

to some of our competitors, a process that takes the time and energy of our management and may
incur additional legal and consultant costs.

Due in part to the competitive bidding process under which government contracts are awarded, we

are at risk of incurring expenses and delays if one or more of our competitors protest contracts awarded to
us. Contract protests remain common in our industry and may result in a requirement to resubmit offers for
the protested contract or in the termination, reduction, or modification of the awarded contract. It can take
many months to resolve contract protests and, in the interim, the contracting government agency or
department may suspend our performance under the contract pending the outcome of the protest. Even if
we prevail in defending the contract award, the resulting delay in the startup and funding of the work under
these contracts may adversely affect our operating results.

Moreover, in order to protect our competitive position, we may protest the contract awards of our
competitors. This process takes the time and energy of our executives and employees, is likely to divert
management’s attention from other important matters and could cause us to incur additional legal and
consultant costs.

COMPLIANCE RISKS

We are subject to various routine and non-routine governmental and other reviews, audits and
investigations, and unfavorable results could force us to adjust previously reported operating results,
affect future operating results, and subject us to a variety of penalties and sanctions.

Government departments and agencies we work for, including non-U.S., U.S. federal, and many state
and local government clients, review, audit and investigate our contract performance, pricing practices, cost
structure, financial capability, and compliance with applicable laws, rules, and regulations. We have
experienced growth in services related to disaster recovery in recent years, and those activities, by their
nature, may become politicized and involve interaction with multiple tiers of national, state, territorial and
local governments, subcontractors, and citizens that increase the risk of claims, audits, investigations,
reviews, monitoring and litigation. Any of these reviews, audits and investigations could raise issues that
have significant adverse effects, including, but not limited to, delayed payments, substantial adjustments to
our previously reported operating results and substantial effects on future operating results. If a government
review, audit, or investigation uncovers improper or illegal activities, we may be subject to civil and
criminal penalties and administrative sanctions, including termination of contracts, repayment of amounts
already received under contracts, forfeiture of profits, suspension of payments, fines, and suspension or
debarment from doing business with government agencies and departments, any of which could adversely
affect our reputation, our revenue, our operating results, and/or the value of our stock. In addition, we could
suffer serious harm to our reputation and our stock price could decline if allegations of impropriety are
made against us, whether true or not.

Federal government audits have been completed on our incurred contract costs only through 2011 for
our NIH-cognizant indirect rates and through 2015 for our USAID-cognizant indirect rates. Audits for costs
incurred on work performed since then have not yet been completed. In addition, non-audit reviews may
still be conducted on all of our government contracts, even for periods before 2011.

INTERNATIONAL OPERATIONS RISKS

Our business in the U.K. and the E.U. could be negatively affected by uncertainties related to the
U.K.’s exit from the E.U. and other potential developments in the E.U.

Our U.K. and Belgian operations have traditionally serviced most of our European clients, including
the European Commission, and there has been, and remains, a risk that these operations could be disrupted
by the withdrawal of the U.K. from the E.U., often referred to as “Brexit.”

The U.K.’s withdrawal from the E.U. became effective on January 31, 2020 but was subject to a
transition period that lasted until December 31, 2020, when a new U.K./E.U. trade agreement became
effective. Consistent with the political declaration that accompanied the withdrawal treaty, the new trade
deal preserved significant elements of “free trade” between the U.K. and the E.U. However, such an exit
from the E.U. was unprecedented. It remains uncertain how the commercial, legal, regulatory and tax
environment in which we, our customers and our counterparties operate will be affected by Brexit going
forward. Among the many necessary changes, the U.K. will have its own customs territory and set its own
tariffs. The new trade deal was relatively undeveloped in terms of trade in services, which could affect our
ability to provide services into the E.U. from the U.K.

23

The challenges that continue to surround the terms of the U.K.’s exit from the E.U. and its

consequences could adversely impact customer and investor confidence and relationships, result in
additional market volatility and adversely affect our businesses and results of operations. These effects
have derived, and could continue to derive, from delays or reductions in contract awards, canceled
contracts, increased costs, fluctuations in exchange rates, difficulty in recruiting or in gaining permission to
employ existing staff, difficulty in supplying services across the E.U.-U.K. border, or less favorable
payment terms.

There also remains the possibility of further political and constitutional changes within the U.K.,

specifically in relation to Scotland or Northern Ireland (which is accorded a special status with enhanced
access to the E.U. Single Market under the withdrawal treaty), with different but significant consequences.
Further changes to the functioning model of the E.U. could result in a reduction in the financial resources
of the European Commission which could lead to a decrease in the funding and scope of our work for that
client. In addition, security, sovereignty, and financial system stability issues resulting from Brexit or other
geopolitical events, or the E.U. actions driven by those events, could change the current balance of
responsibility established between the European Commission and member states, or affect the results of the
E.U. budget-setting process, either of which could also reduce the funding and scope of our work for that
client.

PRIVACY, CYBERSECURITY, TECHNOLOGY, AND DATA PROTECTION RISKS

Impermissible use, misuse or an improper disclosure of personal data or confidential information
and breaches of, or disruptions to, our information technology systems or those of our third-party
providers, could adversely affect our business and could result in liability and harm our reputation.

We and our vendors process increasingly large amounts of personal and sensitive personal data
(collectively, “Personal Data”) concerning our existing and potential employees, clients, client customers,
vendors, or other third parties (collectively, “Data Subjects”), as well as handle confidential information on
our clients’ behalf. Therefore, we must ensure that we, as well as our vendors, can comply and demonstrate
compliance with the various countries’ and U.S. states’ privacy and data protection laws, rules, and
regulations (collectively, “Privacy and Data Protection Law(s)”) in any location where we or our vendors
process Data Subjects’ Personal Data. Privacy and Data Protection Laws often vary significantly, and the
changes to existing laws and adoption of new, more rigorous laws occurs on an increasing basis. For
example, the GDPR requires us to meet stringent requirements regarding (i) our access, use, disclosure,
transfer, protection, or other processing of Personal Data; and (ii) the ability of Data Subjects to exercise
their related various rights such as to access, correct or delete their Personal Data. The 2018 California
Consumer Privacy Act (“CCPA”), which went into effect January 2020, now imposes similar requirements.
New privacy laws in California, Colorado, and Virginia will take effect in 2023, with others likely to
follow. Several privacy bills have also been introduced in Congress. Key markets in the Asia-Pacific
region have also recently adopted GDPR-like legislation, including China’s new Personal Information
Protection Law. Failure to meet Privacy and Data Protection Law requirements could result in significant
civil penalties (including fines up to 4% of annual worldwide revenue under the GDPR) as well as criminal
penalties. Privacy and Data Protection Law requirements also confer a private right of action in some
countries, including under the GDPR. We may incur substantial costs associated with protecting Personal
Data and maintaining compliance with the various Privacy and Data Protection Laws, including restrictions
on international data transfers, in particular in light of the increasing scrutiny by supervisory authorities.
These costs could adversely affect our results of operations. In addition, any inability, real or perceived, to
adequately address privacy and data protection concerns, or to comply with applicable Privacy and Data
Protection Laws, policies, industry standards, or contractual obligations could result in additional cost and
liability to us, damage our reputation, negatively impact our ability to win new contracts or process
Personal Data in certain geolocations, and otherwise adversely affect our business.

Systems and/or service failures could interrupt our operations, leading to reduced revenue and
profit.

Any interruption in our operations or any systems failures, including, but not limited to: (i) the
inability of our staff to perform their work in a timely fashion, whether caused by limited access to and/or
closure of our and/or our clients’ offices or otherwise; (ii) the failure of network, software and/or hardware
systems; and (iii) other interruptions and failures, whether caused by us, a third-party service provider,
unauthorized intruders and/or hackers, computer viruses, natural disasters, power shortages, terrorist attacks
or otherwise, could cause loss of data and interruptions or delays in our business or that of our clients, or
both. In addition, the failure or disruption of mail, communications and/or utilities could cause an

24

interruption or suspension of our operations or otherwise harm our reputation or business. Our property and
business interruption insurance may be inadequate to compensate us for all losses that may occur as a result
of any system or operational failure or disruption and, as a result, revenue, profits and operating results
could be adversely affected.

We provide digital marketing services in highly competitive and constantly evolving markets. Our
success in these markets depends on our ability to develop and integrate new technologies into our
business and enhance our existing products and services, as well as our ability to respond to rapid
changes in technology in order to remain competitive.

In our consumer and financial market, we provide digital marketing services in highly competitive
markets. We compete principally with large systems consulting and implementation firms, traditional and
digital advertising and marketing agencies, offshore consulting and outsourcing companies, and clients’
internal information systems departments. To a lesser extent, other competitors include boutique consulting
firms that maintain specialized skills and/or are geographically focused. We expect these competitors to
devote significant effort to maintaining and growing their respective market shares. If we cannot respond
effectively to advances by our competitors in this market, or grow our own business efficiently, our overall
business and operating results could be adversely affected.

Our success in this competitive market depends in part on our ability to adapt to rapid technological
advances and evolving standards in computer and mobile device hardware and software development and
media infrastructure, changing and increasingly sophisticated customer needs, newly developed digital
marketing services and platform introductions and enhancements. If, within this market, we are unable to
develop new or sufficiently differentiated products and services, to enhance and improve our products and
support services in a timely manner or to position and/or price our products and services to meet demand,
our overall business and operating results could be adversely affected.

We depend on our intellectual property and our failure to protect it could harm our competitive
position.

Our success depends in part upon our internally developed technology and models, proprietary

processes, and other intellectual property that we incorporate in our products and utilize to provide our
services. If we fail to protect our intellectual property, our competitors could market services or products
similar to our services and products, which could reduce demand for our offerings. Government clients
typically retain a perpetual, worldwide, royalty-free right to use the intellectual property we develop for
them in a manner defined within government regulations, including providing it to other government
agencies or departments, as well as to our competitors in connection with their performance of government
contracts. When necessary, we seek authorization to use intellectual property developed for the government
or to secure export authorization. Government clients may grant us the right to commercialize software
developed with government funding, but they are not required to do so. If we improperly use intellectual
property that was even partially funded by government clients, these clients could seek damages and
royalties from us, sanction us, and prevent us from working on future government contracts. Actions could
also be taken against us if we improperly use intellectual property belonging to others besides our
government clients. In addition, there can be substantial costs associated with protecting our intellectual
property, which can also have an adverse effect on our results of operations.

RISKS RELATED TO ACQUISITIONS

When we undertake acquisitions, they may present integration challenges, fail to perform as
expected, increase our liabilities, and/or reduce our earnings.

One of our growth strategies is to make strategic acquisitions. When we complete acquisitions, it may

be challenging and costly to integrate the acquired businesses due to operating and integrating new
accounting systems, differences in the locations of personnel and facilities, differences in corporate
cultures, disparate business models, or other reasons. If we are unable to successfully integrate acquired
companies, our revenue and operating results could suffer. In addition, we may not successfully achieve the
anticipated cost efficiencies and synergies from these acquisitions. Also, our costs for managerial,
operational, financial, and administrative systems may increase and be higher than anticipated. During and
following the integration of an acquired business, we may experience attrition, including losing key
employees and/or clients of the acquired business, which could adversely affect our future revenue and
operating results and prevent us from achieving the anticipated benefits of the acquisition.

25

The businesses we acquire may have liabilities or adverse operating issues, or both, that we either fail

to discover through due diligence or underestimate prior to the consummation of the acquisition. These
liabilities and/or issues may include the acquired business’ failure to comply with, or other violations of,
applicable laws, rules, or regulations or contractual or other obligations or liabilities. As the successor
owner, we may be financially responsible for, and may suffer harm to our reputation or otherwise be
adversely affected by, such liabilities and/or issues. An acquired business also may have problems with
internal controls over financial reporting, which could in turn cause us to have material deficiencies or
material weaknesses in our own internal controls over financial reporting. These and any other costs,
liabilities, issues, and/or disruptions associated with any past or future acquisitions, and the related
integration, could harm our operating results.

As a result of our acquisitions, we have substantial amounts of goodwill and intangible assets, and
changes in business conditions could cause these assets to become impaired, requiring write-downs
that would adversely affect our operating results.

All of our acquisitions have involved purchase prices in excess of tangible asset values net of
liabilities assumed, resulting in the creation of an increased amount of goodwill and other intangible assets.
As of December 31, 2022, goodwill and purchased intangibles accounted for approximately 58% and 6%,
respectively, of our total assets. Under U.S. generally accepted accounting principles, we do not amortize
goodwill acquired in a purchase business combination. We evaluate the recoverability of recorded
goodwill annually, as well as when events or circumstances indicate there may be an impairment or if we
have a material change in reporting units. Although we have to date determined that goodwill has not been
impaired, future events or changes in circumstances that result in an impairment of goodwill or intangible
assets would have a negative impact on our profitability and operating results.

RISKS RELATED TO OUR CORPORATE AND CAPITAL STRUCTURE

Provisions of our charter documents and Delaware law may prevent or deter potential acquisition
bids to acquire us and other actions that stockholders may consider favorable, and the market price
of our common stock may be lower as a result.

Our charter documents contain the following provisions that could have an anti-takeover effect:

•

•

•

•

•

•

Our board of directors is divided into three classes, making it more difficult for stockholders to
change the composition of the board;

Directors may be removed only for cause;

Our stockholders are not permitted to call a special meeting of the stockholders;

All stockholder actions are required to be taken by a vote of the stockholders at an annual or
special meeting or by a written consent signed by all of our stockholders;

Our stockholders are required to comply with advance notice procedures to nominate
candidates for election to our board of directors or to place stockholders’ proposals on the
agenda for consideration at stockholder meetings; and

The approval of the holders of capital stock representing at least two-thirds of our voting power
is required to amend our indemnification obligations, director classifications, stockholder
proposal requirements, and director candidate nomination requirements set forth in our
amended and restated certificate of incorporation and amended and restated bylaws.

In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General

Corporation Law, which regulates corporate acquisitions. These provisions could discourage potential
acquisition proposals; delay or prevent a change-in-control transaction; discourage others from making
tender offers for our common stock; and/or prevent changes in our management.

There are risks associated with our outstanding and future indebtedness which could reduce our
profitability, limit our ability to pursue certain business opportunities and reduce the value of our
stock.

26

As of December 31, 2022, we had an aggregate of $556.3 million of outstanding indebtedness (net of

unamortized debt issuance costs) under a credit facility that will mature on May 6, 2027. Subject to the
limits contained in the agreements governing our outstanding debt, we may incur additional debt in the
future to fund our ongoing operations as well as acquisitions. Our ability to pay interest and repay the
principal for our indebtedness from time to time, as well as meet our financial and operating covenant
requirements, is dependent upon our ability to, among other things, manage our business operations, and
generate sufficient cash flows to service such debt. If we are unable to comply with the terms of our
financing agreements or obtain additional required financing, this could ultimately result in a material
adverse effect on our financial results and the value of our stock. Among other things, our debt could:

•

•

•

•

•

Make it difficult to obtain additional financing for working capital, capital expenditures,
acquisitions, or other general corporate purposes;

Result in a substantial portion of our cash flows from operations being dedicated to the
payment of the principal and interest on our debt, as well as used to make debt service
payments;

Limit our flexibility in planning for, and reacting to, changes in our business and the
marketplace;

Place us at a competitive disadvantage relative to other less leveraged firms; and

Increase our vulnerability to economic downturns and rises in interest rates.

Should any of these or other unforeseen consequences arise, they could have an adverse effect on our
business, financial condition, results of operations, future business opportunities and/or ability to satisfy our
obligations under our debt.

We cannot assure you that we will pay special or regular dividends on our stock in the future.

The board of directors has authorized, declared and paid regular dividends each quarter since 2018.

The declaration of any future dividends and the establishment of the per share amount, record dates and
payment dates for any such future dividends are subject to the discretion of the board of directors taking
into account future earnings, cash flows, net income, dividend yield and other factors. Authorization of
dividends by the Board is subject to adherence/compliance with our credit facility. There can be no
assurance that the board of directors will declare any dividends in the future. To the extent that expectations
by market participants regarding the potential payment, or amount, of any special or regular dividend prove
to be incorrect, the price of our common stock may be materially and negatively affected and investors that
bought shares of our common stock based on those expectations may suffer a loss on their investment.

GENERAL RISK FACTORS

Health epidemics, pandemics and similar outbreaks may have material adverse effects on our
business, financial position, results of operations, and/or cash flows.

We face various risks and uncertainties related to health epidemics, pandemics and similar outbreaks,
including the global pandemic resulting from the outbreak of COVID-19 and its variants. These risks relate
to, among other things, the demand for our services, the availability of our staffing and business partners, a
possible slowdown of client decision-making as to our services, a significant deterioration of global supply
chains and other business conditions, and a possible reprioritization of spending by our clients.

We serve both government and commercial clients around the globe, with our services concentrated
in the U.S. and Europe, both of which have experienced severe levels of COVID-19 illness. The effects of
the pandemic on client needs, priorities, spending patterns and decision-making can have a material effect
on our activity levels and revenues.

The pandemic may also affect significant portions of our workforce, and that of our subcontractors

and other suppliers and business partners, who may be unable to work effectively due to illness, lockdowns
and quarantines, facility closures, travel restrictions, or other government actions and reasons in connection
with the COVID-19 pandemic. As a result, our operations and operating results could be adversely affected
by factors such as an inability to perform fully or efficiently on our contracts, and some of our costs may
not be fully recoverable or be adequately covered by insurance.

27

It is possible that the spread of new variants of COVID-19 or other infectious diseases may also
cause delays in the willingness or ability of clients to perform, including making timely payments to us, and
other unpredictable events.

In addition, volatility in the global capital markets that may result from the pandemic and related

business conditions could restrict our access to capital and/or increase our cost of capital.

We continue to work with our stakeholders (including customers, employees, subcontractors and

other suppliers and business partners) to assess, address and mitigate the impact of this global pandemic.
While efforts have been made to curtail the pandemic, at this time given potential new variants, we cannot
predict the continuing impact of the COVID-19 pandemic, but it could have a material adverse effect on
our business, financial position, results of operations, and/or cash flows.

Failure to identify, hire, train and retain talented employees who are committed to our mission and
vision could have a negative effect on our reputation and our business.

Our business, which entails the provision of professional services to government and commercial
clients, largely depends on our ability to attract and retain qualified employees who are often in demand.
Additionally, as our business continues to evolve, as we acquire new businesses, and as we provide a wider
range of services, we become increasingly dependent on the capabilities of our employees in order to meet
the needs of our diverse client base. If we are unable to recruit and retain a sufficient number of qualified
employees that are committed to our mission and vision, we may incur higher costs related to an increase in
subcontractors, hiring, training and retention.

We also rely on key senior members of management. As a result, effective succession planning is

important to our long-term success. Failure to ensure effective transfer of knowledge and smooth
transitions involving these key employees could hinder our strategic planning and execution as well as
impair our ability to effectively serve our clients and maintain and grow our business. Such developments
could adversely affect our future revenue and operating results.

Changes to U.S. tax laws may adversely affect our financial condition or results of operation and
create the risk that we may need to adjust our accounting for these changes.

We are subject to taxation in the U.S. and in certain foreign jurisdictions in which we operate, and

any changes to income tax laws and rules and regulations could adversely affect our business and our
results of operations.

Our failure to comply with complex laws, rules, and regulations could cause us to lose business and
subject us to a variety of penalties and sanctions.

We must comply with laws, rules, and regulations that affect how we do business with our
government clients and impose added costs on our business. Each government client has its own laws,
rules, and regulations that affect its contracts. Some of the more significant laws and regulations affecting
the formation, administration, and performance of U.S. government contracts include:

•

•

•

•

•

•

U.S. Federal Acquisition Regulation, as well as Cost Accounting Standards, and agency and
department regulations analogous or supplemental to federal regulation;

U.S. Foreign Corrupt Practices Act;

U.S. Truthful Cost or Pricing Data Act (formerly known as the Truth in Negotiations Act);

U.S. Procurement Integrity Act;

U.S. Civil False Claims Act and the False Statements Act; and

U.S. laws, rules and regulations restricting (i) the use and dissemination of information
classified for national security purposes, (ii) the exportation of specified products,
technologies, and technical data, and (iii) the use and dissemination of sensitive but
unclassified data.

Any failure to comply with applicable federal, and/or state and local government laws, rules and

regulations could subject us to civil and criminal penalties and administrative sanctions, including
termination of contracts, repayment of amounts already received under contracts, forfeiture of profits,
suspension of payments, fines, and suspension or debarment from doing business with federal and/or state

28

and local government agencies and departments, any of which could adversely affect our reputation, our
revenue, our operating results, and/or the value of our stock.

In addition, the federal government and other governments with which we do business may change

their procurement practices or adopt new contracting laws, rules, or regulations that could be costly to
satisfy or that could impair our ability to obtain new contracts and reduce our revenue and profit, such as
curtailing the use of services firms or increasing the use of firms with a “preferred status,” such as small
businesses.

In addition to our U.S. operations, we also have a significant presence in key markets outside the

U.S., including offices in the U.K., Belgium, India, and Canada. Failure to abide by laws, rules and
regulations applicable to us because of our work outside the U.S., such as the U.K. Bribery Act and the
European Union’s (“E.U.”) General Data Protection Regulation (“GDPR”), could have similar effects to
those described above.

Our international operations pose additional risks to our profitability and operating results.

We have offices in the U.K., Belgium, India, China, and Canada, among others, and expect to
continue to have international operations and offices, some of which are in economically developing
countries that do not have a well-established business infrastructure. We also perform work in some
countries where we do not have a physical office. Some of the countries in which we work have a history of
political instability or may expose our employees and subcontractors to physical danger over and above
pandemic-related risk. Expansion into selective new geographic regions requires considerable management
and financial resources, the expenditure of which may negatively impact our results, and we may never see
any return on our investment.

Our international operations are subject to risks associated with operating in, and selling to and in,

countries other than the U.S., that could, directly or indirectly, adversely affect our international and
domestic operations and our overall revenue, profit, and operating results including, but not limited to:

•

•

•

•

•

Compliance with the laws, rules, regulations, policies, legal standards, and enforcement
mechanisms of the U.S. and the other countries in which we operate, including bribery and
anti-corruption laws, economic sanctions, trade restrictions, local tax and income laws, and
local labor and employment laws, which are sometimes inconsistent;

Restrictions on the ability to repatriate profits to the U.S. or otherwise move funds;

Potential personal injury to personnel who may be exposed to military conflicts and other
hostile situations in foreign countries;

Expropriation and nationalization of our assets or those of our subcontractors, and other
inabilities to protect our property rights; and/or

Difficulties in managing and staffing such operations, including obtaining work permits or
visas, identifying qualified local employees, operating according to different local labor laws
and regulations, dealing with different local business cultures and practices, and collecting
contract receivables.

In addition, because of our work with international clients, certain of our revenues and costs are

denominated in other currencies, then translated to U.S. dollars for financial reporting purposes. Our
revenues and profits may decrease as a result of currency fluctuations and devaluations and limitations on
the conversion of foreign currencies into U.S. dollars and in the conversion between foreign currencies. We
may, from time to time, have forward contract agreements (“hedges”) related to our operations in the U.K.,
to hedge the remeasurement between the Euro and the pound sterling. We recognize the changes in the fair
value of the economic hedges in our results of operations. We cannot be sure that our hedges will be
successful in reducing the risks to us of our exposure to foreign currency fluctuations and, in fact, the
hedges may adversely affect our operating results.

Presently, there is active armed conflict across the territory of Ukraine as a result of Russian
invasion. The war has impacted member states of the E.U. in a variety of ways, including through their
provision of weapons, humanitarian supplies, and substantial financial support to Ukraine, and their
absorption of millions of Ukrainian and other refugees. While no E.U. member states have become active
participants in the conflict, a number of them have greatly increased their defense preparations and
investments, reflecting a wholesale shift in the security environment on the continent. It is not currently
foreseen that an immediate diplomatic resolution to the conflict is likely. In such an environment, it is

29

possible that E.U. spending priorities may shift suddenly, that our current programs could be disrupted, and
that our future opportunities could be diminished.

Our operations face continuous and evolving cybersecurity risks.

The continued occurrence of high-profile data breaches of other companies provides evidence of an
external environment hostile to information security. In particular, cybersecurity attacks are increasing in
number and sophistication for the Company.

We face a constant risk of cybersecurity threats, whether from deliberate attacks or unintentional

events, including computer viruses, attacks by computer hackers, malicious code, cyber and phishing
attacks, and other electronic security breaches such as unauthorized access to our and our clients’ systems.
Any of these could lead to disruptions in critical systems, unauthorized releases of confidential or otherwise
protected information, and/or corruption of data. The so-called “insider threat,” the introduction of
unauthorized data and changes into systems by employees and contractors, is an increasingly present risk to
be managed.

As a federal government contractor, we face a heightened risk of a security breach or disruption with

respect to personally identifiable, controlled unclassified information, classified, or otherwise protected
data resulting from an attack by computer hackers, foreign governments, and/or cyber terrorists. Improper
disclosure of this information could harm our reputation and affect our relationships with business partners,
lead to legal exposure, or subject us to liability under laws, rules, and regulations that protect personal or
other confidential data, resulting in increased costs or loss of revenue.

Although we devote significant resources to our cybersecurity programs and have implemented
security measures to protect our systems and to prevent, detect, and respond to cybersecurity incidents, we
have been the target of these types of attacks in the past. We have not identified a material adverse impact
on our business or our financial results, individually or in the aggregate, due to being the target of prior
cyber-attacks. While we are committed to threat detection and mitigation efforts to reduce such impact,
there can be no assurance that our efforts will prevent such attacks or their impact in the future.

As these security threats continue to evolve, we may be required to devote additional resources to

protect, prevent, detect, and respond against cybersecurity attacks, system disruptions and security
breaches. Moreover, we also rely in part on third-party software and information technology vendors to run
our information systems. Any failure of these third-party systems, which are outside of our control but still
impact us, could have similar adverse effects.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We lease our offices and do not own any real estate. As of December 31, 2022, we leased
approximately 208,274 square feet of office space at our corporate headquarters at 1902 Reston Metro
Plaza, Reston, Virginia (in the Washington, D.C. metropolitan area) through May 2039 (the “Reston
Office”). The Reston Office houses a portion of our operations and almost all of our corporate functions,
including most of our staff within executive management, treasury, accounting, legal, human resources,
business and corporate development, facilities management, information services, and contracts.

As of December 31, 2022, we had leases in place for approximately 1.4 million square feet of office
space in more than 82 office locations throughout the U.S. and around the world, with various lease terms
expiring over the next sixteen years. As of December 31, 2022, approximately 18,325 square feet of the
space we leased was subleased to other parties. We continually review our need for office space, and we
believe that our current office space, as well as other future office space we expect to be able to obtain in
the lease marketplace, will be sufficient to meet our office space needs.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various legal matters and proceedings arising in the ordinary course of business.
While these matters and proceedings cause us to incur costs, including, but not limited to, attorneys’ fees,
we currently believe that any ultimate liability arising out of these matters and proceedings will not have a
material adverse effect on our financial position, results of operations, or cash flows.

An update on litigation related to our Road Home contract is discussed in “Note 20 - Commitment

and Contingencies — Road Home Contract” in our financial statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

31

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

Our common stock trades on the NASDAQ Global Select Market under the symbol “ICFI.”

Holders

As of February 24, 2023, there were 27 registered holders of record of our common stock. This

number is not representative of the number of beneficial holders because many of the shares are held by
depositories, brokers, or nominees.

Dividends

We currently expect to continue paying dividends comparable with our historic dividend payments.
The declaration and payment of any dividends is at the sole discretion of the board of directors and is not
guaranteed. Our amended credit facility contains certain restrictions related to the payment of cash
dividends, requiring us to meet certain covenants prior to and after the declaration of any dividend.

Stock Performance Graph

The following graph compares the cumulative total stockholder return on our common stock from

December 31, 2017 through December 31, 2022, with the cumulative total return on (i) the NASDAQ
Composite, (ii) the Russell 2000 stock index, (iii) our previous peer group composed of other governmental
and commercial service providers: Booz Allen Hamilton Holding Corporation; CACI International Inc.;
CBIZ, Inc.; CRA International, Inc.; Exponent Inc.; FTI Consulting, Inc.; Huron Consulting Group Inc.;
Maximus, Inc.; Resources Connection, Inc.; Science Applications International Corporation; Tetra Tech,
Inc.; Unisys Corporation; and VSE Corporation, and (iv) our index-based comparator that replaces our
previous peer group. We have elected to replace our peer group comparator with an index-based
comparator (S&P 1500 companies having GICS Code 2020 Commercial & Professional Services), because
(i) we believe this index is reflective of the markets we operate in and (ii) we expect the composition of the
index to be less susceptible to year-over-year volatility due to acquisitions or divestitures by ICF or the
component companies within the index.

In this transition year, in accordance with Item 201(e)(4) of Regulation S-K, the stock performance

graph below includes both the new index and the peer group that we used in the immediately preceding
year to assist our investors in understanding the impact of the transition.

32

The comparison below assumes an initial investment of $100.00 on December 31, 2017 in which all

dividends (if any) are reinvested and all returns are market-cap weighted. The historical information set
forth below is not necessarily indicative of future performance.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among ICF International, Inc, the NASDAQ Composite Index, the Russell 2000 Index,
2021 Peer Group and 2022 Peer Group

$250

$200

$150

$100

$50

$0

12/17

12/18

12/19

12/20

12/21

12/22

ICF International, Inc

NASDAQ Composite

Russell 2000

2021 Peer Group

2022 Peer Group

*$100 invested on 12/31/17 in stock or index, including reinvestment of dividends.
Fiscal year ending December 31.

33

2017

2018

2019

2020

2021

2022

Year Ended December 31,

$

100.00 $

124.40 $

177.20 $

144.95 $

201.18 $

195.41

100.00

100.00

97.16

88.99

132.81

192.47

235.15

158.65

111.70

134.00

153.85

122.41

100.00

110.79

164.18

186.54

215.26

227.09

100.00

97.90

136.28

161.75

195.42

177.20

ICF
International,
Inc.
NASDAQ
Composite
Russell 2000
Index
2021 Peer
Group
2022 Peer
Group

Recent Sales of Unregistered Securities

None.

Repurchases of Equity Securities

The following table summarizes the share repurchase activity for the three months ended
December 31, 2022 for our share repurchase plan and shares purchased in satisfaction of employee tax
withholding obligations related to the settlement of restricted stock units.

Total
Number of
Shares
Purchased (a)

Average
Price Paid
per Share (a)

9,371

7,036

$

$

— $
$

16,407

110.50

105.15

—
108.21

Total Number
of Shares Purchased
as Part of Publicly
Announced Plans
or Programs (b)

Approximate Dollar
Value of Shares that
May Yet Be
Purchased
Under the Plans or
Programs (b)

— $

111,869,762

— $

111,869,762

— $
—

111,869,762

Period

October 1 – October 31
November 1 – November
30
December 1 – December
31
Total

(a)

(b)

The total number of shares purchased of 16,407 includes any shares repurchased pursuant to our
share repurchase program described further in footnote (b) below, as well as shares purchased from
employees to pay required withholding taxes related to the settlement of restricted stock units in
accordance with our applicable long-term incentive plan. During the three months ended
December 31, 2022, we repurchased 16,407 shares of common stock from employees in satisfaction
of tax withholding obligations at an average price of $108.21 per share.

The current share repurchase program authorizes share repurchases in the aggregate up to $200.0
million. The Restated Credit Agreement permits share repurchases, provided that our Consolidated
Leverage Ratio, prior to and after giving effect to such repurchases, is 0.50 to 1.00 less than the then
applicable maximum Consolidated Leverage Ratio and subject to a net liquidity of $100.00 million.
Additionally, we are permitted to make share repurchases up to $25.0 million per calendar year
without triggering a default. During the three months ended December 31, 2022, we did not
repurchase any shares under the share repurchase program. For additional information on the share
repurchase program, see “Note 18 - Share Repurchase Program” in our financial statements.

ITEM 6. [RESERVED]

34

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial

statements and related notes included in Item 8.“Financial Statements and Supplementary Data” in this
Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that
involve risks, uncertainties, and assumptions, such as statements of our plans, objectives, expectations, and
intentions. The cautionary statements made in this Annual Report on Form 10-K should be read as
applying to all related forward-looking statements wherever they appear in this Annual Report on Form
10-K. Our actual results could differ materially from those anticipated in the forward-looking statements.
Factors that could cause or contribute to our actual results differing materially from those anticipated
include those discussed in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. This section
of this Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022
and 2021. Discussions of 2021 items and year-to-year comparisons between 2021 and 2020 that are not
included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal
year ended December 31, 2021, which was filed with the SEC on February 25, 2022, and is incorporated
by reference into this Management’s Discussion and Analysis of Financial Condition and Results of
Operations.

OVERVIEW AND OUTLOOK

We provide professional services and technology-based solutions, including management,

marketing, technology, and policy consulting and implementation services. We help our clients conceive,
develop, implement, and improve solutions that address complex business, natural resource, social,
technological, and public safety issues. Our services primarily support clients that operate in four key
markets:

•

•

•

•

Energy, Environment, and Infrastructure;

Health, Education, and Social Programs;

Safety and Security; and

Consumer and Financial.

We provide services to our diverse client base that deliver value throughout the entire life cycle of a

policy, program, project, or initiative. Our primary services include:

•

•

•

•

•

Advisory Services;

Program Implementation Services;

Analytics Services;

Digital Services; and

Engagement Services.

Our clients utilize our services because we combine diverse institutional knowledge and experience
with the deep subject matter expertise of our highly educated staff, which we deploy in multi-disciplinary
teams. We have successfully worked with many of our clients for decades, with the result that we have a
thorough and nuanced perspective of their objectives and needs. We serve both governmental and
commercial clients. Our government clients include those from departments and agencies of the federal
government, state and local governments, and international governments. Our government efforts include
work performed under subcontract agreements to commercial clients whose ultimate customer is
government agencies and departments.

Our largest clients are U.S. federal government departments and agencies. In fact, our federal
government clients have included every cabinet-level department, most significantly HHS, DoD, and DoS.
Federal government clients generated approximately 55%, 47%, and 44% of our revenue in 2022, 2021,
and 2020, respectively. State and local government clients generated approximately 15% of our revenue in

35

each of 2022, 2021, and 2020, respectively. International government clients generated approximately 6%,
9%, and 6% of our revenue in 2022, 2021, and 2020, respectively.

We also serve a variety of commercial clients worldwide, including: airlines, airports, electric and

gas utilities, health care companies, banks and other financial services companies, transportation, travel and
hospitality firms, non-profits/associations, manufacturing firms, retail chains, and distribution companies.
Our commercial clients, which include clients outside the U.S., generated approximately 24%, 29%, and
35% of our revenue in 2022, 2021, and 2020, respectively. We believe that our domain expertise and the
program knowledge developed from our research and analytics, and assessment and advisory engagements
further position us to provide a full suite of services.

We report operating results and financial data as a single segment based on the consolidated
information used by our chief operating decision-maker in evaluating the financial performance of our
business and allocating resources. Our single segment represents our core business: professional services to
our broad array of clients. Although we describe our multiple service offerings to clients that operate in
four markets to provide a better understanding of the scope and scale of our business, we do not manage
our business or allocate our resources based on those service offerings or client markets. Rather, on a
project-by-project basis, we assemble the best team from throughout the enterprise to deliver highly
customized solutions that are tailored to meet the needs of each client.

We believe that, in the long-term, demand for our services will continue to grow as government,

industry, and other stakeholders seek to address critical long-term societal and natural resource issues due
to heightened concerns about the environment and use of clean energy and energy efficiency; health
promotion, treatment, and cost control; the means by which healthcare can be delivered effectively on a
cross-jurisdiction basis; natural disaster relief and rebuild efforts; and ongoing homeland security threats. In
the wake of the major hurricanes (Ian, Harvey, Ida, Irma, Maria, Laura and Michael) that devastated
communities in Texas, Florida, North Carolina, Louisiana, the U.S. Virgin Islands, and Puerto Rico, the
affected areas remain in various stages of relief and recovery efforts. We believe our prior and current
experience with disaster relief and rebuild efforts, including after Hurricanes Katrina and Rita and
Superstorm Sandy, put us in a favorable position to continue to provide recovery and housing assistance,
and environmental and infrastructure solutions, including disaster mitigation, on behalf of federal
departments and agencies, state, territorial and local jurisdictions, and regional agencies.

We also see significant opportunity to further leverage our digital and client engagement capabilities

across our client base. Our future results will depend on the success of our strategy to enhance our client
relationships and seek larger engagements that span the entire program life cycle, and to complete and
successfully integrate additional strategic acquisitions. We will continue to focus on building scale in our
vertical and horizontal domain expertise, developing business with our existing clients as well as new
customers, and replicating our business model in selective geographies. In doing so, we will continue to
evaluate strategic acquisition opportunities, such as our recent acquisitions of ITG in 2020, ESAC and
Creative Systems in 2021, and SemanticBits and Blanton in 2022, that enhance our subject matter
knowledge, broaden our service offerings, gain access or expand customer relationships, and/or provide
scale in specific geographies. Although we continue to see favorable long-term market opportunities, there
are certain business challenges facing all government service providers. Administrative and legislative
actions by the federal government to address changing priorities or in response to the budget deficit could
have a negative impact on our business, which may result in a reduction to our revenue and profit and
adversely affect cash flow. Similarly, the very nature of opportunities arising out of disaster recovery
means they can involve unusual challenges. Factors such as the overall stress on communities and people
affected by disaster recovery situations, political complexities and challenges among involved government
agencies, and a higher-than-normal risk of audits and investigations may result in a reduction to our
revenue and profit and adversely affect cash flow. However, we believe we are well positioned to provide a
broad range of services in support of initiatives that will continue to be priorities to the federal government,
as well as to state and local and international governments and commercial clients. We believe that the
combination of internally generated funds, available bank borrowings, and cash and cash equivalents on
hand will provide the required liquidity and capital resources necessary to fund ongoing operations,
potential acquisitions, customary capital expenditures, and other working capital requirements.

36

Our results of operations and cash flows may vary significantly from quarter to quarter depending on

a number of factors, including, but not limited to:

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

•

Progress of contract performance;

Extraordinary economic events and natural disasters;

Number of billable days in a quarter;

Timing of client orders;

Timing of award fee notices;

Changes in the scope of contracts;

Variations in purchasing patterns under our contracts;

Federal and state and local governments’ and other clients’ spending levels;

Federal government shutdowns;

Timing of billings to, and collection of payments from, clients;

Timing of receipt of invoices from, and payments to, employees and vendors;

Commencement, completion, and termination of contracts;

Strategic decisions, such as acquisitions, consolidations, divestments, spin-offs, joint ventures,
strategic investments, and changes in business strategy;

Timing of significant costs and investments (such as bid and proposal costs and the costs
involved in planning or making acquisitions);

Timing of events related to discrete tax items;

Our contract mix and use of subcontractors or the timing of other direct costs for which we
may earn lower contract margin;

Changes in contract margin performance due to performance risks;

Additions to, and departures of, staff;

Changes in staff utilization;

Paid time off taken by our employees;

Level and cost of our debt;

Changes in accounting principles and policies; and/or

General market and economic conditions.

Because a significant portion of our expenses (such as personnel, facilities, and related costs) are

fixed in the short-term, contract performance and variation in the volume of activity, as well as in the
number and volume of contracts commenced or completed during any year, may cause significant
variations in operating results from year to year. We generally have been able to price our contracts in a
manner that accommodates the rates of inflation experienced in recent years, although we cannot ensure
that we will be able to do so in the future.

IMPACT OF THE COVID-19 PANDEMIC

On March 11, 2020, the World Health Organization characterized the novel strain of coronavirus
disease COVID-19 as a global pandemic. The pandemic disrupted global supply chains, created pressure on
workforces, and added volatility to the financial markets.

We are primarily a service business and, to date, we have experienced continuity in the majority of

our work for our government clients, which accounted for approximately 76%, 71%, and 65% of our

37

revenues for the years ended December 31, 2022, 2021, and 2020, respectively. There were postponements
of events and challenges around project work requiring travel and personal contact to perform services
under the contracts, but overall, our government clients have continued to require our services.

Of the remaining 24%, 29%, and 35% of our total revenue for the years ended December 31, 2022,

2021, and 2020, respectively, the majority was generated from commercial energy markets and commercial
marketing services. In commercial energy, where we work primarily for utility clients, we have
experienced trends similar to those with our government clients, although some aspects of energy
efficiency programs have been altered to reduce direct interaction with consumers. The commercial
marketing services include public event management and marketing technology, which was impacted based
on the deferral or cancellation of marketing events. These two elements of commercial marketing services
combined for 6%, 9% and 16% of our total company-wide revenues for the years ended December 31,
2022, 2021, and 2020 respectively.

During 2022, we completed our transition to in-person operations at all of our offices. Effective
November 21, 2022, we no longer require current and prospective U.S.-based employees to be vaccinated
or have reasonable accommodation in place, but we will continue to follow the public health guidance from
Centers for Disease Control and Prevention, the local government, and our clients.

BUSINESS COMBINATIONS

A key element of our growth strategy is to pursue acquisitions. During the previous three fiscal years,

we acquired a total of six companies summarized as follows:

Incentive Technology Group, LLC – In January 2020, we completed the acquisition of ITG, one of

the leading providers of cloud-based platform services to the federal government.

Eco-Tech Consultants, Inc. – In December 2020, we completed the acquisition of Eco-Tech
Consultants, Inc., an ecological consulting firm located in Louisville, Kentucky that provides a range of
ecological services across the Eastern United States.

ESAC – In November 2021, we acquired ESAC, one of the leading specialized providers of
advanced health analytics, research data management and bioinformatics solutions to U.S. federal health
agencies.

Creative Systems and Consulting – In December 2021, we acquired Creative Systems, a premier

provider of IT modernization and digital transformation solutions to U.S. federal agencies.

SemanticBits, LLC – In July 2022, we acquired SemanticBits, a premier partner to U.S. federal

health agencies for mission-critical digital modernization solutions.

Blanton & Associates – In September 2022, we completed the acquisition of Blanton, an

environmental consulting, planning, and project management firm headquartered in Austin, Texas.

CRITICAL ACCOUNTING ESTIMATES

Our discussion of financial condition and results of operations is based on our consolidated financial
statements prepared in accordance with U.S. generally accepted accounting principles ("U.S. GAAP"). The
preparation of these consolidated financial statements requires us to make certain estimates, assumptions,
and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses. If any of these
estimates, assumptions or judgments prove to be incorrect, our reported results could be materially affected.
Actual results may differ significantly from our estimates under different assumptions or conditions.

We believe that the estimates, assumptions and judgments involved in the accounting practices

described below have the greatest potential impact on our financial statements and, therefore, consider
them to be critical accounting policies. Significant accounting estimates are more fully described and
discussed in “Note 2 - Summary of Significant Accounting Policies” in the “Notes to Consolidated
Financial Statements.”

Revenue Recognition

We generate our revenue by primarily providing services and technology-based solutions for clients.

We enter into agreements with clients that create enforceable rights and obligations and for which it is
probable that we will collect the consideration to which we will be entitled as services and solutions are
provided to the client.

38

Our contracts may be partially funded, often incrementally in annual amounts. We determine the
transaction price based on the history of funding, the client's need for the program, the length of time before
funding is available, and the client's intent and ability to fund and include the unfunded portion of the
contract if it is probable that it will be funded based on these criteria.

For contracts with multiple performance obligations and for customized solutions in which the
pricing is based on specific negotiations with each client, we use a cost-plus margin approach to estimate
the standalone selling price of each performance obligation. We generally recognize revenue over time as
services and performance obligations are transferred to the client, based on the extent of progress towards
satisfaction of the performance obligation. The selection of the method used to measure progress requires
judgment and, among other things, is dependent on the contract type selected by the client during contract
negotiation and the nature of the services and solutions to be provided.

For cost-based contracts, we recognize revenue as a single performance obligation based on contract

costs incurred, as we become contractually entitled to reimbursement of the contract costs, plus a most
likely estimate of award or incentive fees earned on those costs even though final determination of fees
earned occurs after the contractually stipulated performance assessment period ends. For the years ended
December 31, 2022, 2021, and 2020, revenue from cost-based contracts totaled $263.6 million, $274.1
million, and $237.6 million, respectively.

For performance obligations requiring the delivery of a service for a fixed price, we use the ratio of
actual costs incurred to total estimated costs at completion (“EAC”) provided that costs incurred (an input
method) represents a reasonable measure of progress towards the satisfaction of a performance obligation,
in order to estimate the portion of total revenue earned. Contract costs that are not reflective of our progress
toward satisfying a performance obligation are not included in the calculation of the measure of progress.
We estimate the EAC by making certain assumptions and judgments such as the level of efforts from
internal staff and/or subcontractors and cost of materials needed to complete the tasks. Our cost estimate is
based on our prior experience and expertise in delivery of similar services, which allow us to make
reasonable assumptions and estimates that are close to actual costs to complete the obligations. However,
changes in the scope or complexity of work, availability of materials needed, or performance could cause a
change in the EAC. We routinely review EACs for changes that could materially impact our measurement
of progress toward completion of the performance obligations and adjust our revenue in the period that the
changes occur. When a contract EAC exceeds the contract value, we recognize the loss in the same period
of determination. For the years ended December 31, 2022, 2021, and 2020, our revenue from contracts in
which we use EACs totaled $287.4 million, $253.6 million, and $199.2 million, respectively.

Our contracts may include variable considerations such as award fees and incentives that may
increase or decrease the transaction price. The actual amounts are typically determined and awarded at the
end of a performance period and the final awarded amount is based on achieving certain performance
metrics, program milestones, or cost targets at the customer’s discretion. We estimate the most likely
amount expected to achieve based on our prior history in providing the services to the customer or, if no
history exists, we constrain the variable consideration until the initial determination by the customer.

Fair Value of Acquired Assets from Business Combinations

Our consolidated balance sheets as of December 31, 2022 and 2021 include $126.5 million and $79.6

million, respectively, of net intangible assets that were created through business acquisitions.

We allocate the purchase price of an acquired business to the tangible assets and separately

identifiable intangible assets acquired, less liabilities assumed, based on their respective fair values (except
for contract assets and contract liabilities after the adoption of Accounting Standards Update 2021-08,
Business Combinations: Accounting for Contract Assets and Contract Liabilities from Contracts with
Customers). Such fair value assessment requires us to make assumptions, judgments, and estimates such as,
but not limited to, future cash flows, revenue growth, customer retention rates, and discount rates based on
information that exists at the date of the acquisition which may subsequently change. We recognize any
adjustments to the preliminary amounts that are identified during the measurement period which is twelve
months or less from the date of the acquisition.

Accounting for Income Taxes

Our provisions for federal, state, and foreign income taxes are calculated from consolidated income

based on current tax laws and any changes in tax rates from the rates used previously in determining the
deferred tax assets and liabilities from temporary differences between financial statement carrying amounts
and amounts on our tax returns.

39

We recognize deferred tax assets and liabilities for the expected future tax consequences of
temporary differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are expected to be recovered or settled. We
evaluate our ability to benefit from all deferred tax assets and establish valuation allowances for amounts
we believe are not more likely than not to be realized.

We use a more-likely-than-not recognition threshold based on the technical merits of the income tax

position taken to evaluate uncertain tax positions. Uncertain tax positions that meet the more-likely-than-
not recognition threshold are measured in order to determine the tax benefit recognized in the financial
statements.

Recent Accounting Pronouncements

New accounting standards are discussed in “Note 2 - Summary of Significant Accounting Policies”

in the “Notes to Consolidated Financial Statements”.

SELECTED KEY METRICS

In order to evaluate operations, we track revenue by key metrics that provide useful information

about the nature of our operations. Client markets provide insight into the breadth of our expertise. Client
type is an indicator of the diversity of our client base. Revenue by contract mix provides insight in terms of
the degree of performance risk that we have assumed. Significant variances in the key metrics tables that
are provided below are discussed under the revenue section of the results of operations.

Client markets

The following table shows revenue generated from client markets as a percentage of total revenue for

the periods indicated. For each client, we have attributed all revenue from that client to the market we
consider to be the client’s primary market, even if a portion of that revenue relates to a different market.
Certain minor revenue amounts reported in the prior years have been reclassified within key market
categories based on our current view of the client’s primary market in order to increase the comparability of
the current year to prior years.

Energy, environment, and infrastructure
Health, education, and social programs
Safety and security
Consumer and financial

Total

Year ended
December 31, 2022
Dollars

Percent

Year ended
December 31, 2021
Dollars

Percent

Year ended
December 31, 2020
Dollars

Percent

$

$

664,996
906,081
129,357
79,530
1,779,964

37% $
51%
7%
5%

100% $

653,080
677,736
115,659
106,573
1,553,048

42% $
44%
7%
7%

609,358
677,454
120,599
99,464
100% $ 1,506,875

40%
45%
8%
7%
100%

Our primary clients within the client markets are the agencies and departments of the federal

government and commercial clients. Most of our revenue is from contracts on which we are the prime
contractor, which we believe provides us with strong client relationships. In 2022, 2021, and 2020,
approximately 91%, 91%, and 92% of our revenue, respectively, was from prime contracts.

Client type

The table below shows our revenue by type of client as a percentage of total revenue for the periods

indicated. Certain immaterial revenue amounts in the prior years have been reclassified due to minor
adjustments and reclassification within client type.

U.S. federal government
U.S. state and local government
International government

Government
Commercial
Total

Year ended
December 31, 2022
Dollars

Percent

Year ended
December 31, 2021
Dollars

Percent

Year ended
December 31, 2020
Dollars

Percent

$

$

980,406
260,562
102,808
1,343,776
436,188
1,779,964

55% $
15%
6%
76%
24%
100% $

735,104
235,353
139,237
1,109,694
443,354
1,553,048

666,968
47% $
219,507
15%
93,581
9%
980,056
71%
526,819
29%
100% $ 1,506,875

44%
15%
6%
65%
35%
100%

40

Contract mix

Contract mix varies from year to year due to numerous factors, including our business strategies and
the procurement activities of our clients. Unless the context requires otherwise, we use the term “contracts”
to refer to contracts and any task orders or delivery orders issued under a contract. There are three main
types of contracts: time-and-materials contracts, fixed-price contracts, and cost-based contracts.

The following table shows the approximate percentage of our revenue for each of these types of

contracts for the periods indicated. Certain immaterial revenue amounts in the prior years have been
reclassified due to minor adjustments and reclassification within contract type.

Time-and-materials
Fixed-price
Cost-based

Total

Year ended
December 31, 2022
Dollars

Percent

Year ended
December 31, 2021
Dollars

Percent

Year ended
December 31, 2020
Dollars

Percent

$

$

713,581
802,804
263,579
1,779,964

40% $
45%
15%
100% $

633,152
645,761
274,135
1,553,048

732,365
41% $
536,903
41%
237,607
18%
100% $ 1,506,875

49%
35%
16%
100%

Payments we received on cost-based contracts with the federal government are provisional payments

subject to adjustment upon audit by the government. Such audits have been finalized through 2011 for
NIH-cognizant indirect rates and through 2015 for USAID-cognizant indirect rates, and any adjustments
have been immaterial. Contract revenue for subsequent periods has been recorded in amounts that are
expected to be realized on final audit and settlement of costs in those years.

RESULTS OF OPERATIONS

The following table sets forth certain items from our consolidated statements of comprehensive
income for the years ended December 31, 2022 and 2021 and expresses these items as a percentage of
revenue for the periods indicated and the period-over-period rate of change in each of them. Our discussion
of the items for the years ended December 31, 2021 and 2020 can be found in our Annual Report on Form
10-K for the year ended December 31, 2021, which was filed with the SEC on February 25, 2022.

Years Ended December 31, 2022 and 2021
(dollars in thousands)

2022

Year Ended December 31,
2022

2021

2021

Year to Year Change
2021 to 2022

Dollars

Percent

Revenue
Direct Costs
Operating Costs and Expenses
Indirect and selling expenses
Depreciation and amortization
Amortization of intangible assets
Total Operating Costs and Expenses
Operating Income
Interest, net
Other expense
Income Before Income Taxes
Provision for Income Taxes
Net Income

$

$

Dollars
$

1,779,964
1,134,422

Percentages

1,553,048
979,570

100.0%
63.7%

100.0% $ 226,916
154,852
63.1%

486,863
21,482
28,435
536,780
108,762
(23,281)
(1,501)
83,980
19,737
64,243

$

430,572
19,478
12,492
462,542
110,936
(9,984)
(862)
100,090
28,958
71,132

27.4%
1.2%
1.6%
30.2%
6.1%
(1.3)%
(0.1)%
4.7%
1.1%
3.6%

27.7%
1.3%
0.8%
29.8%
7.1%
(0.6)%
(0.1)%
6.4%
1.9%
4.6% $

56,291
2,004
15,943
74,238
(2,174)
(13,297)
(639)
(16,110)
(9,221)
(6,889)

14.6%
15.8%

13.1%
10.3%
127.6%
16.1%
(2.0)%
133.2%
74.1%
(16.1)%
(31.8)%
(9.7)%

Year ended December 31, 2022 compared to year ended December 31, 2021

Revenue. Revenue for the year ended December 31, 2022, was $1,780.0 million, compared to

$1,553.0 million for the year ended December 31, 2021, representing an increase of $226.9 million or
14.6%. The growth in revenue was primarily from increases of $245.3 million from our U.S. federal
government and $25.2 million from our U.S. state and local government client markets. These gains were
offset by decreases of $36.4 from our international government and $7.2 million from our commercial
client markets. As a percentage of total revenue, government revenues comprised 76% for the year ended
December 31, 2022 and 71% for the prior year. Commercial revenues were 24% of total revenue for the
year ended December 31, 2022 and 29% for the prior year. The increase in revenue from our U.S. federal

41

government client market was from increases of $221.3 million, $12.6 million, and $11.4 million from our
health, education, and social programs, energy, environment, and infrastructure, and safety and security
client markets, respectively. The increase in revenue from our U.S. state and local government client
market was from increases of $12.8 million and $12.5 million from energy, environment, and infrastructure
and health, education, and social programs client markets, respectively, offset by a decrease of $0.1 million
from safety and security client market. International government saw decreases of $35.7 million and $3.2
million from energy, environment, and infrastructure and health, education, and social programs client
markets offset by an increase of $2.5 million from safety and security client market. The decrease in
commercial revenue was from $27.0 million, $2.3 million, and $0.1 million from our consumer and
financial, health, education, and social programs, and safety and security client markets offset by an
increase of $22.2 million from energy, environment, and infrastructure client market.

Direct costs. Direct costs for the year ended December 31, 2022 were $1,134.4 million compared to

$979.6 million for the year ended December 31, 2021, an increase of $154.9 million or 15.8%. The increase
in direct costs reflect the growth in business resulting in an increase in our headcount and direct labor and
associated fringe benefits costs of $103.4 million and $51.5 million in subcontractor and other direct costs.
For the year ended December 31, 2022, direct labor and associated fringe benefits costs as a percentage of
total direct costs was 56.4% compared to 54.8% for the same period in 2021, and subcontractor and other
direct costs as a percentage of total direct costs was 43.6% compared to 45.2% in 2021. Direct costs as a
percent of revenue was 63.7% for the year ended December 31, 2022 compared to 63.1% for 2021.

Indirect and selling expenses. Indirect and selling expenses generally include our management,
facilities, and infrastructure costs for all employees and the salaries and wages related to indirect activities,
including stock-based and cash-based incentive compensation provided to employees whose compensation
and other benefit costs are included in indirect and selling expenses, plus associated fringe benefits not
directly related to client engagements.

Indirect and selling expenses for the year ended December 31, 2022, were $486.9 million compared

to $430.6 million for 2021, an increase of $56.3 million or 13.1%. The increase in indirect and selling
expenses was primarily due to an increase in indirect labor and associated fringe benefits costs and other
compensation costs of $37.2 million, and in general and administrative costs of $19.1 million. The increase
in indirect labor, associated fringe benefits costs, and other compensation costs was due to higher
headcounts for the year ended December 31, 2022 as compared to the same period in 2021. Indirect labor
as a percentage of total indirect and selling expenses was 67.2% for the year ended December 31, 2022
which is comparable to the 67.4% for the same period in 2021. General and administrative costs as a
percentage to total indirect and selling expenses was 32.8% for the year ended December 31, 2022
compared to 32.6% for 2021. Indirect and selling expenses as a percent of revenue decreased to 27.4% for
the year ended December 31, 2022, compared to 27.7% for the year ended December 31, 2021.

Depreciation and amortization. Depreciation and amortization was $21.5 million for the year ended

December 31, 2022, compared to $19.5 million for the prior year, an increase of $2.0 million or 10.3%.
The increase was the result of additional capital expenditures for our newly occupied Reston, Virginia
headquarters.

Amortization of intangible assets. Amortization of intangible assets for the year ended December 31,
2022 was $28.4 million compared to $12.5 million for the prior year. The increase was due to amortization
of additional intangible assets acquired from our recent acquisitions of ESAC and Creative in the fourth
quarter of 2021 and of SemanticBits and Blanton in 2022.

Operating income. For the year ended December 31, 2022, operating income was $108.8 million
compared to $110.9 million for the prior year, a decrease of $2.1 million or 2.0%. The main drivers for the
decrease were lower gross margins in 2022 compared to 2021, higher indirect and selling expenses to
support our growing operations, and higher amortization expense from our recent acquisitions, offset by
higher revenue. Operating income as a percentage of revenue was 6.1% for the year ended December 31,
2022 compared to 7.1% for the prior year.

Interest, net. For the year ended December 31, 2022, interest, net was $23.3 million, compared to
$10.0 million for the prior year, an increase of $13.3 million or 133.2%. The increase for the year ended
December 31, 2022 was primarily due to our higher average debt balance of $575.0 million in 2022
compared to $335.5 million in 2021. The higher average debt balance was due, in part, to the acquisition of
SemanticBits and Blanton in 2022. In addition, our average interest rate increased to 3.3% in 2022

42

compared to 1.6% in 2021. Interest income was $0.2 million compared to $0.3 million for 2022 and 2021,
respectively.

Other expense. For the year ended December 31, 2022, other expense was $1.5 million compared to

$0.9 million for the prior year. The increase of $0.6 million was primarily due to losses from disposal of
fixed assets as a result of moving from our prior headquarters.

Provision for income taxes. The effective income tax rate for the years ended December 31, 2022
and December 31, 2021, was 23.5% and 28.9%, respectively. Our effective tax rate, including state and
foreign taxes net of federal benefit for the year ended December 31, 2022, was lower than the prior year
primarily due to the impact of a tax loss incurred on a subsidiary investment, windfall tax benefits of
equity-based compensation, and federal and state tax credits partially offset by non-deductible executive
compensation, transaction costs, and losses on insurance investments recognized.

NON-GAAP MEASURES

The following tables provide reconciliations of financial measures that are not calculated in

accordance with generally accepted accounting principles in the U.S. to their most comparable U.S. GAAP
measures (“non-GAAP”). While we believe that these non-GAAP financial measures may be useful in
evaluating our financial information, they should be considered supplemental in nature and not as a
substitute for financial information prepared in accordance with U.S. GAAP. Other companies may define
similarly titled non-GAAP measures differently and, accordingly, care should be exercised in
understanding how we define these measures as similarly named measures are unlikely to be comparable
across different companies.

Service Revenue

We compute Service Revenue as U.S. GAAP revenue less subcontractor and other direct costs
(which include third-party materials and travel expenses). We believe Service Revenue is a useful measure
to investors as it represents services that we provide to clients through our own employees.

The table below presents a reconciliation of U.S. GAAP revenue to Service Revenue for the periods

indicated:

Revenue
Subcontractor and other direct costs
Service revenue

EBITDA and Adjusted EBITDA

Year ended December 31,
2021
$ 1,553,048
(443,135)
$ 1,109,913

2022
$ 1,779,964
(494,561)
$ 1,285,403

2020
$ 1,506,875
(463,364)
$ 1,043,511

Earnings before interest, tax, and depreciation and amortization (“EBITDA”) is a measure we use to
evaluate operating performance. We believe EBITDA is useful in assessing ongoing trends and, as a result,
may provide greater visibility in understanding our operations.

Adjusted EBITDA is EBITDA further adjusted to eliminate the impact of certain items that we do

not consider to be indicative of the performance of our ongoing operations. We evaluate these adjustments
on an individual basis based on both the quantitative and qualitative aspects of the item, including their size
and nature, as well as whether or not we expect them to occur as part of our normal business on a regular
basis. We believe that the adjustments applied in calculating Adjusted EBITDA are reasonable and
appropriate to provide additional information to investors.

EBITDA and Adjusted EBITDA are not intended to be measures of free cash flow for management’s
discretionary use as these measures do not include certain cash requirements such as interest payments, tax
payments, capital expenditures and debt service.

The following table presents a reconciliation of net income to EBITDA and Adjusted EBITDA for

the periods indicated.

43

Net income
Interest, net
Provision for income taxes
Depreciation and amortization
EBITDA (1)
Impairment of long-lived assets (2)
Acquisition-related expenses (3)
Severance and other costs related to staff realignment (4)
Facilities consolidations and office closures (5)
Expenses related to the transfer to our new corporate headquarters (6)
Expenses related to retirement of Executive Chair (7)
Expenses related to our agreement for the sale of receivables (8)

Total Adjustments
Adjusted EBITDA

Year ended December 31,
2020
2021
2022
$ 64,243 $ 71,132 $ 54,959
13,712
19,714
33,748
122,133
3,090
1,983
4,764
1,852
—
8,825
—
20,514
$191,836 $159,029 $142,647

23,281
19,737
49,917
157,178
8,354
6,441
6,302
5,034
8,287
—
240
34,658

9,984
28,958
31,970
142,044
8,215
4,798
1,242
1,434
899
397
—
16,985

(1) The calculation of EBITDA for the years ended December 31, 2021 and 2020 has been revised to conform to the current period
calculation of EBITDA. Specifically, interest income of $0.3 million and $0.2 million was reclassified from "Other expense" to
"Interest, net" on the consolidated statements of comprehensive income.

(2) Represents impairment of right-of-use lease assets associated with certain operating leases ceased to be used by us. The amount
for the year ended December 31, 2021 been revised to include $0.3 million in losses on disposal of fixed assets related to the
leases to conform to the current presentation.

(3) These costs consist primarily of third-party costs and integration costs associated with our acquisitions and/or potential

acquisitions and divestitures.

(4) These costs are mainly due to involuntary employee termination benefits for Company officers, groups of employees who have
been terminated as part of a consolidation or reorganization or, to the extent that the costs are not included in the previous two
categories, involuntary employee termination benefits for employees who were terminated as a result of COVID-19.

(5) These costs are exit costs associated with terminated leases or full office closures. The exit costs include charges incurred under a
contractual obligation that existed as of the date of the accrual and for which we will (i) continue to pay until the contractual
obligation is satisfied but with no economic benefit to us or (ii) we contractually terminated the obligation and ceased utilizing the
facilities. The amount for the year ended December 31, 2020 been revised to include $0.2 million in losses on disposal of fixed
assets related to the leases to conform to the current presentation.

(6) These costs are additional rent as a result of us taking possession of our new corporate headquarters in Reston, Virginia, during
the fourth quarter of 2021 as well as losses from disposal of fixed assets that we recognized as a result of our transfer to Reston.

(7) These costs include severance, pro rata incentive bonus, welfare benefits, and acceleration of equity awards we incurred under the
departing officer’s severance agreement during the fourth quarter of 2020. As a result of the employment agreement, the departing
officer was able to maintain certain equity awards beyond his retirement date, including performance-based awards that are
subject to changes until they vest.

(8) These costs include legal and structuring fees related to our 2022 Master Receivables Purchase Agreement with MUFG Bank,

Ltd.put in place for the sale of our receivables from time-to-time.

Non-GAAP Diluted Earnings per Share

Non-GAAP diluted earnings per share (“Non-GAAP Diluted EPS”) represents diluted U.S. GAAP

earnings per share (“U.S. GAAP Diluted EPS”) excluding the impact of certain items noted above, as well
as the impact of amortization of intangible assets related to our acquisitions and income tax effects of these
exclusions. While these adjustments may be recurring and not infrequent or unusual, we do not consider
these adjustments to be indicative of the performance of our ongoing operations. We believe that the
supplemental adjustments applied in calculating Non-GAAP Diluted EPS are reasonable and appropriate to
provide additional information to investors.

The following table presents a reconciliation of U.S. GAAP Diluted EPS to Non-GAAP Diluted EPS

for the periods indicated:

44

U.S. GAAP Diluted EPS
Impairment of long-lived assets
Acquisition-related expenditures
Severance and other costs related to staff realignment
Facilities consolidations and office closures
Expenses related to the transfer to our new corporate headquarters
Expenses related to retirement of Executive Chair
Expenses related to our agreement for the sale of receivables
Amortization of intangibles
Income tax effects (1)
Non-GAAP Diluted EPS

Year ended December 31,
2020
2021
2022

$

$

3.38
0.44
0.34
0.33
0.26
0.44
—
0.01
1.49
(0.92)
5.77

$

$

3.72 $
0.43
0.25
0.06
0.08
0.05
0.02
—
0.65
(0.44)
4.82 $

2.87
0.16
0.10
0.25
0.10
—
0.46
—
0.70
(0.47)
4.17

(1) Income tax effects were calculated using the effective tax rate, adjusted for discrete items, if any, of 28.0%, 28.9% and 26.4% for

the year ended December 31, 2022, 2021 and 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Borrowing Capacity. Short-term liquidity requirements are created by our use of
funds for working capital, capital expenditures, debt service, dividends, and share repurchases. We expect
to meet these requirements through a combination of our cash and cash equivalents at hand, cash flow from
operations and borrowings. Our primary source of borrowings is from our Credit Facility, as described in
“Note 10 - Long-Term Debt” in the “Notes to Consolidated Financial Statements” in this Annual Report.
As of December 31, 2022, we had $545.4 million of unused borrowing capacity, or $440.0 million after
taking into account the financial and performance-based limitations, available under the Credit Facility to
fund our ongoing operations, future acquisitions, dividend payments, and share repurchase program.
Should the need arise, we intend to further increase our borrowing capacity in the future to provide us with
adequate working capital to continue our ongoing operations.

In March 2020, the World Health Organization characterized the novel COVID-19 virus as a global

pandemic. Although we continue to face risks and uncertainties related to COVID-19 and its variants, to
date we have not experienced any significant impact on our liquidity and capital resources which remain
available to us.

There are other conditions, such as the ongoing war in Ukraine and the recent increase in inflation,

both in the U.S. and globally, that create uncertainty in the global economy, which in turn may impact,
among other things, our ability to generate positive cash flows from operations and our ability to
successfully execute and fund key initiatives in the near future. However, our current belief is that the
combination of internally generated funds, available bank borrowings, and cash and cash equivalents on
hand will provide the required liquidity and capital resources necessary to fund ongoing operations,
customary capital expenditures and acquisitions, quarterly cash dividends, share repurchases and organic
growth. Additionally, we continuously analyze our capital structure to ensure we have capital to fund future
strategic acquisitions. We continue to monitor the state of the financial markets on a regular basis to assess
the availability and cost of additional capital resources from both debt and equity sources. We believe that
we will be able to access these markets at commercially reasonable terms and conditions if, in the future,
we need additional borrowings or capital.

Material Cash Requirements from Contractual Obligations. As of December 31, 2022, contractual
obligations that require a material use of cash include repayments of our Credit Facility and operating lease
obligations for facilities and equipment.

45

At December 31, 2022, our outstanding Credit Facility balance was $556.3 million, net of
unamortized debt issuance costs, of which $23.3 million is due in 2023, $26.0 million in 2024, $35.8
million in 2025, $39.0 million in 2026, and the remaining $437.4 million due upon maturity in 2027. We
borrow funds under the Credit Facility at interest rates based on both the SOFR (i.e. 1, 3, or 6-month rates)
and a fluctuating Base Rate (see “Note 10 - Long-Term Debt” in the “Notes to Consolidated Financial
Statements” in this Annual Report). Assuming that our interest rate on the Credit Facility is the same as on
December 31, 2022, we anticipate our interest payments on the debt to be approximately $32.5 million in
2023, $31.0 million in 2024, $29.2 million in 2025, $26.8 million in 2026, and $6.7 million in 2027 when
our Credit Facility expires. The estimates do not take into accounts future drawdowns and repayments on
the debt or changes in the variable interest rate, and actual interest may be different.

As of December 31, 2022, we have operating leases for facilities and equipment with remaining
terms ranging from 1 to 16 years. Our current and long-term operating lease liabilities of $201.6 million at
December 31, 2022 represent the present value of the minimum payments required under the non-
cancellable leases, and the actual cash payments total $248.7 million. The operating lease payment
obligations by year are further discussed in “Note 7 - Leases” in the “Notes to Consolidated Financial
Statements”.

As of December 31, 2022, we also have a finance lease for our Reston headquarters equipment and
furniture with lease payment obligations through 2029 as discussed in “Note 7 - Leases” in the “Notes to
Consolidated Financial Statements”. The current and long-term finance lease liabilities at December 31,
2022 of $18.5 million represent the present value of the minimum payments.

Inflation. Our business and results of operations have not been materially affected by inflation and

changing prices during the period presented and we do not expect to be materially affected in the future due
to the nature of our business as a provider of professional services with contracts that can be negotiated
with new prices.

Share Repurchase Program. The objective of our share repurchase program has been to offset

dilution resulting from employee stock compensation. Under the program, purchases can be made from
time to time at prevailing market prices in open market purchases or in privately negotiated transactions
pursuant to Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and in accordance with applicable insider trading and other securities laws and
regulations. The timing and extent to which we repurchase our shares will depend upon market conditions
and other corporate considerations, as may be considered in our sole discretion. The purchases will be
funded from existing cash balances and/or borrowings and the repurchased shares will be held in treasury.
Our Credit Facility permits share repurchases, provided that our Consolidated Leverage Ratio, prior to and
after giving effect to such repurchases, is 0.50 to 1.00 less than the then-applicable maximum Consolidated
Leverage Ratio and subject to a net liquidity of $100.00 million. Notwithstanding the formula-based limit,
we are permitted to make share repurchases up to $25 million per calendar year provided that we are not in
default.

In September 2017, the Company’s board of directors (the “board”) approved a share repurchase
program that authorizes share repurchases in the aggregate up to $100.0 million. In November 2021, the
board approved an increase to the share repurchase program to a new limit of $200.0 million, inclusive of
the prior limit. During the year ended December 31, 2022, we repurchased 176,375 shares under this
program at an average price of $96.18 per share. As of December 31, 2022, $111.9 million remained
available for share repurchase.

Dividends. Cash dividends declared in 2022 were as follows:

Dividend Declaration Date
February 23, 2022
May 4, 2022
August 3, 2022
November 3, 2022

Dividend Per Share
0.14
$
0.14
$
0.14
$
0.14
$

Record Date
March 25, 2022
June 10, 2022
September 9, 2022
December 9, 2022

Payment Date
April 13, 2022
July 14, 2022
October 13, 2022
January 12, 2023

46

Cash Flows. We consider cash on deposit and all highly liquid investments with original maturities
of three months or less to be cash and cash equivalents. The following table sets forth our sources and uses
of cash for the following years.

(in thousands)
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(Decrease) increase in cash, cash equivalents and restricted
cash

$

Year ended December 31,
2021
110,205
(194,481)
23,233

2022
162,206
(258,844)
90,371

$

$

2020
173,145
(270,948)
169,955

(1,198)

(511)

3,353

$

(7,465) $

(61,554) $

75,505

Our operating cash flows are primarily affected by the overall profitability of our contracts, our

ability to invoice and collect from our clients in a timely manner, and the timing of vendor and
subcontractor payments in accordance with negotiated payment terms. We bill most of our clients on a
monthly basis after services are rendered. In the fourth quarter of 2022, we entered into a Master
Receivables Purchase Agreement with MUFG Bank, Ltd. that allows us to sell certain billed receivables
(see “Note 4 - Contract Receivables, Net” in the “Notes to Consolidated Financial Statements” in this
Annual Report) and sold $10.0 million of billed receivables under this arrangement.

Operating activities provided $162.2 million in cash for the year ended December 31, 2022 compared

to $110.2 million for 2021, an increase of $52.0 million. The increase was primarily due to an increase of
cash resulting from higher collections of our billed receivables, sale of certain billed receivables, timing of
vendor payments, and lower income tax payments, offset by higher interest payments.

Investing activities used cash of $258.8 million for the year ended December 31, 2022, compared to
$194.5 million for, 2021 as a result of higher usage of cash for acquisitions and for purchases of property,
equipment, and software. During the year ended December 31, 2022 we used $237.3 million to acquire
SemanticBits and Blanton. During the year ended December 31, 2021, we used $174.5 million for
payments to acquire ESAC and Creative Systems.

Our cash flows from financing activities provided $90.4 million for the year ended December 31,
2022 compared to $23.2 million for 2021. The increase was primarily due to additional net borrowings
against our Credit Facility of $30.1 million and lower net payments of restricted contract funds of $45.5
million partially offset by higher debt issuance costs of $4.9 million.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to certain financial market risks, the most predominant being fluctuations in interest

rates for borrowings under the Credit Facility and foreign exchange rate risk.

Borrowings under the Credit Facility accrue interest at variable rates. We monitor interest rate
fluctuations and outlooks as an integral part of our overall risk management program, which recognizes the
unpredictability of financial markets and seeks to reduce potentially adverse effects of higher interest rates
on our results of operations. As part of this strategy, we may use interest rate swap arrangements to hedge a
portion of our interest rate risk by securing hedges that effectively convert our variable rate debt to fixed
rate debt. We do not use such instruments for speculative or trading purposes. Based on our borrowings
under the Credit Facility and amount of hedging in 2022, a 1% increase in interest rates would have
increased interest expense by approximately $5.9 million and would have decreased our annual net income
and operating cash flows by a comparable amount. At December 31, 2022, we had four interest rate swap
agreements with a total aggregate notional amount of $200.0 million to hedge against changes in interest
rates and offset potential increases in interest expense. See “Note 12 - Derivative Instruments and Hedging
Activities” in the “Notes to Consolidated Financial Statements”.

As a result of conducting business in currencies other than the U.S. dollar, we are subject to market

risk with respect to adverse fluctuations in currency exchange rates. In general, our currency risk is
mitigated largely by matching costs with revenues in a given currency. However, our exposure to
fluctuations in other currencies against the U.S. dollar increases as a greater portion of our revenue is
generated in currencies other than the U.S. dollar. We may have hedges in place to mitigate our foreign
exchange risk related to our operations in Europe; however, given the amount of business conducted

47

outside of the U.S, there is some risk that revenue and profits will be affected by foreign currency exchange
rate fluctuations.

We use a sensitivity analysis to assess the impact of movement in foreign currency exchange rates on

revenue. During the year ended December 31, 2022, 8% of our revenue was generated from our
international operations based on the location to which a contract was awarded. As a result, a 10% increase
or decrease in the value of the U.S. dollar against all currencies would have an estimated impact on revenue
of approximately 1%, or $13.5 million. Actual gains and losses in the future could differ materially from
this analysis based on the timing and amount of both foreign currency exchange rate movements and our
actual exposure.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements of ICF International, Inc. and subsidiaries are provided in Part

IV in this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE

None.

48

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Based on an evaluation under the supervision

and with the participation of the Company’s management, the principal executive officer and principal
financial officer have concluded that the Company’s disclosure controls and procedures, as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act, were effective as of December 31, 2022 to provide
reasonable assurance that information required to be disclosed in reports that it files or submits under the
Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the
SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its
principal executive officer and principal financial officer, as appropriate to allow timely decisions
regarding required disclosure.

Management’s Annual Report on Internal Control Over Financial Reporting. The Company’s

management is responsible for establishing and maintaining adequate internal control over financial
reporting (as such term is defined as of December 31, 2022 in Exchange Act Rules 13a-15(f) and 15d-
15(f)). Management conducted an assessment of the effectiveness of the Company’s internal control over
financial reporting based on the criteria set forth in the 2013 Internal Control—Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the
assessment, management has concluded that its internal control over financial reporting was effective as of
December 31, 2022.

As permitted by the SEC rules, management’s assessment and conclusion on the effectiveness of the
Company’s internal controls over financial reporting as of December 31, 2022, excludes an assessment of
the internal control over financial reporting of SemanticBits and Blanton, acquired on July 13, 2022 and
September 1, 2022, respectively. SemanticBits and Blanton represent total assets, excluding goodwill and
intangibles related to the acquisitions, and revenues constituting 1.2% and 3.8%, respectively, of the
Company’s consolidated total assets and total revenues as of and for the year ended December 31, 2022.

The Company’s independent registered public accounting firm, Grant Thornton LLP, has issued an

audit report on the Company’s internal control over financial reporting, which appears herein.

The Company’s internal control over financial reporting is designed to provide reasonable assurance

regarding the reliability of financial reporting, and the preparation of financial statements for external
purposes in accordance with U.S. GAAP. The Company’s internal control over financial reporting includes
those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with U.S. GAAP; (iii) that the Company’s receipts and expenditures are being
made only in accordance with authorizations of the Company’s management and directors; and (iv) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the Company’s assets that could have a material effect on the financial statements.

Changes in Internal Control Over Financial Reporting. There were no material changes in our
internal control over financial reporting during the last quarter of 2022, which were identified in connection
with management’s evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange
Act, that have materially affected, or are reasonably likely to materially affect, the Company’s internal
control over financial reporting.

Inherent Limitations Over Internal Controls. A control system, no matter how well designed and

operated, can provide only reasonable (not absolute) assurance that the objectives of the control system are
met. Further, the design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of internal controls can provide absolute assurance that all control issues and
instances of fraud, if any, have been detected. Because of the inherent limitations in any control system,
misstatements due to error or fraud may occur and may not be detected. Also, any evaluations of the
effectiveness of controls in future periods are subject to the risk that those internal controls may become
inadequate because of changes in business conditions, or that the degree of compliance with the policies or
procedures may deteriorate.

ITEM 9B. OTHER INFORMATION

None.

49

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS

None.

50

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this item will be included in our Proxy Statement for the 2023 Annual

Meeting of Stockholders (the “2023 Proxy Statement”) and is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item will be included in the 2023 Proxy Statement and is

incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information required by this item will be included in the 2023 Proxy Statement and is

incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE

The information required by this item will be included in the 2023 Proxy Statement and is

incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this item will be included in the 2023 Proxy Statement and is

incorporated herein by reference.

51

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(1)

Financial Statements

PART IV

Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2022,
2021, and 2020
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022, 2021,
and 2020
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements

Page
F-1
F-4

F-5

F-6
F-7
F-8

(2)

Financial Statement Schedules

The financial statement schedules have been omitted since the required information is not applicable

or included in the consolidated financial statements and accompanying notes included in this Form 10-K.

(3) Exhibits

The following exhibits are included with this report or incorporated herein by reference:

Exhibit
Number
3.1

3.2

4.1

4.2

4.3

10.1

10.2

10.3

10.4

10.5

10.6

10.7

Exhibit
Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to
the Company's Form 10-Q, filed August 3, 2017).
Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 to the Company’s
Form 8-K, filed June 2, 2017).
Specimen common stock certificate (Incorporated by reference to Exhibit 4.1 to the Company’s
Form S-1/A (File No. 333-134018), filed September 12, 2006).
See Exhibits 3.1 and 3.2, above, for provisions of the Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws of the Company defining the rights of holders
of common stock of the Company.
Description of the Registrant's Securities Registered Pursuant to Section 12 of the Securities
Exchange Act of 1934 (Incorporated by reference to Exhibit 4.3 to the Company's Form 10-K,
filed February 25, 2022).
2006 Employee Stock Purchase Plan (Incorporated by reference to Exhibit 10.3 to the
Company’s Form S-1 (File No. 333-134018), filed May 11, 2006). +
ICF International, Inc. Nonqualified Deferred Compensation Plan, as amended and restated as
of January 1, 2012 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-K,
filed March 1, 2013). +
ICF International, Inc. 2018 Omnibus Incentive Plan (Incorporated by reference to Exhibit A to
the Company’s Definitive Proxy Statement for the 2018 Annual Meeting of Stockholders, filed
April 20, 2018). +
Form of Restricted Stock Unit Award under the 2018 Omnibus Incentive Plan. (Incorporated by
reference to Exhibit 10.2 to the Company’s Form 8-K, filed June 1, 2018). +
Form of Non-Employee Restricted Stock Unit Award under the 2018 Omnibus Incentive Plan
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed June 27, 2018). +
Form of CEO Performance Share Award Agreement (Incorporated by reference to Exhibit 10.4
to the Company’s Form 8-K, filed June 1, 2018). +
Form of COO Performance Share Award Agreement (Incorporated by reference to Exhibit 10.5
to the Company’s Form 8-K, filed June 1, 2018). +

52

10.8

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

21.0
23.1
31.1

31.2

32.1

Form of General Performance Share Award Agreement under the 2018 Omnibus Incentive Plan.
(Incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K, filed June 1, 2018). +
Form of Cash-Settled Restricted Stock Unit Award under the 2018 Omnibus Incentive Plan.
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed June 1, 2018). +
Restated Employment Agreement by and between the Company and Sudhakar Kesavan, dated
December 29, 2008 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K,
filed December 30, 2008). +
Restated Severance Protection Agreement by and between the Company and Sudhakar
Kesavan, dated December 29, 2008 (Incorporated by reference to Exhibit 10.2 to the
Company’s Form 8-K, filed December 30, 2008). +
Restated Severance Protection Agreement between John Wasson and ICF International, Inc.
dated October 1, 2019 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K,
filed October 1, 2019).+
Amended Severance Letter Agreement by and between the Company and John Wasson, dated
December 12, 2008 (Incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K,
filed December 18, 2008). +
Employment Terms by and between the Company and James C. Morgan, dated June 8, 2012
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 10-Q, filed August 6, 2012).
+
Severance Benefit/Protection Agreement by and between the Company and James C. Morgan,
dated June 8, 2012 (Incorporated by reference to Exhibit 10.2 to the Company’s Form 10-Q,
filed August 6, 2012). +
Severance Letter Agreement by and between the Company and Sergio J. Ostria, dated March 6,
2012 (Incorporated by reference to Exhibit 10.18 to the Company’s Form 10-K, filed on March
8, 2016). +
Amended and Restated Credit Agreement, dated May 6, 2022 (Incorporated by reference to
Exhibit 10.1 to the Company’s Form 8-K, filed May 6, 2022).
Deed of Lease by and between Hunters Branch Leasing, LLC and ICF Consulting Group, Inc.,
effective April 1, 2010 (Incorporated by reference to Exhibit 10.6 to the Company’s Form 10-K,
filed March 11, 2010).
Lease Agreement between ICF Consulting Group, Inc. and CRS Plaza II, LLC, dated as of
October 24, 2019 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, filed
October 30, 2019).
Equity Purchase Agreement between Incentive Technology Group, LLC, Project Lucky
Holdings, LLC, Shadi Michelle Branch, Adam Branch, and ICF Incorporated, L.L.C., dated
January 13, 2020 (Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A,
filed January 14, 2020).
Equity Purchase Agreement by and among Creative Systems and Consulting, L.L.C., Project
Apple Holdings, LLC, Vanitha Khera, Vishal Khera, and ICF Incorporated, L.L.C., dated
December 13, 2021
(Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K/A, filed December 17,
2021).
Equity Purchase Agreement by and among ICF Incorporated, L.L.C., SemanticBits, LLC,
Ramprakash Chilukuri, Vinay Kumar, and Ramprakash Chilukuri, as the Sellers’
Representative, dated June 8, 2022 (Incorporated by reference to Exhibit 10.1 to the Company’s
Form 8-K/A, filed July 1, 2022).
Subsidiaries of the Registrant.*
Consent of Grant Thornton LLP.*
Certificate of the Principal Executive Officer Pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a).*
Certificate of the Principal Financial Officer Pursuant to Exchange Act Rules 13a-14(a) and
15d-14(a).*
Certifications of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.*

53

32.2

101

104

Certifications of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.*

The following materials from the ICF International, Inc. Annual Report on Form 10-K for the
year ended December 31, 2022 formatted in Inline eXtensible Business Reporting Language
(iXBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Comprehensive
Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) Consolidated Statements of
Cash Flows and (v) Notes to Consolidated Financial Statements. *
The cover page from the Company's Annual Report on Form 10-K for the year ended
December 31, 2022, formatted in Inline XBRL

* Submitted electronically herewith.

+ Indicates a management contract or compensatory plan or arrangement required to be filed as an exhibit.

ITEM 16. FORM 10-K SUMMARY

None.

54

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the

registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

March 1, 2023

ICF INTERNATIONAL, INC.
By:

/s/

JOHN WASSON
John Wasson
Chair, President, and Chief Executive
Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed

below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

/s/

JOHN WASSON
John Wasson

/s/ BARRY BROADUS
Barry Broadus

Title

Chair, President, Chief Executive Officer,
and Director
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial Officer and Interim
Principal Accounting Officer)

/s/ MARILYN CROUTHER
Marilyn Crouther

/s/ SCOTT SALMIRS
Scott Salmirs

/s/ Dr. SRIKANT M. DATAR
Dr. Srikant M. Datar

/s/ CHERYL W. GRISÉ
Cheryl W. Grisé

/s/ MICHAEL J. VAN HANDEL
Michael Van Handel

/s/ RANDALL MEHL
Randall Mehl

/s/ Dr. MICHELLE A. WILLIAMS
Dr. Michelle A. Williams

Director

Director

Director

Director

Director

Director

Director

Date

March 1, 2023

March 1, 2023

March 1, 2023

March 1, 2023

March 1, 2023

March 1, 2023

March 1, 2023

March 1, 2023

March 1, 2023

55

[THIS PAGE INTENTIONALLY LEFT BLANK]

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
ICF International, Inc.

Board of Directors and Stockholders
ICF International, Inc.

Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of ICF International, Inc. (a Delaware corporation) and subsidiaries
(the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in
stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of
America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”),
and our report dated March 1, 2023 expressed an unqualified opinion.

Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to
be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and
regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used
and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.

Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material
to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical
audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating
the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it
relates.

Revenue Recognition – estimates-at-completion
As described further in Note 2 to the consolidated financial statements, the Company generally recognizes revenue over time as control
transfers to a client, based on the extent of progress towards satisfaction of the related performance obligation. On certain contracts in
which costs incurred represents a reasonable measure of progress toward satisfaction of a performance obligation and transfer of
control to a customer, revenue is recognized over time using a cost-input method (referred to as the cost-to-cost method). Under the
cost-to-cost method, revenue is recognized based on the proportion of total costs incurred to estimated total costs-at-completion
(“EAC”). A performance obligation’s EAC includes all direct costs such as level of effort from internal staff and/or subcontractors and
costs of materials needed to complete the tasks. The accounting for these contracts involves judgement, particularly as it relates to the
process of estimating total costs for the performance obligation. We identified the estimates of total costs for the performance
obligations that recognize revenue using the cost-to-cost method as a critical audit matter.

The principal considerations for our determination that the use of estimates-at-completion in recognizing revenue is a critical audit
matter are the significant management judgments involved in the initial creation and subsequent updates to the Company’s estimates-

F-1

at-completion and related profit recognized, which required challenging and subjective auditor judgment in the execution of our
procedures.

Our audit procedures in response to this matter included the following, among others.

•

•

•

We tested the design and operating effectiveness of controls related to management’s review of estimate-at-completion
analyses and the significant assumptions underlying the estimated total costs to complete.

We tested management’s process for developing, revising and applying estimates-at-completion to a selection of contracts.
Our testing included evaluating key inputs and assumptions by comparing them to underlying supporting documentation,
contract documentation or other corroborating evidence, such as subcontractor agreements, customer correspondence and
contractual milestones or other documentation that supports estimated costs.

We performed a lookback analysis of certain contracts completed during the year ended December 31, 2022 and
compared the final estimated costs at completion to the estimate of costs throughout the contract life cycle to assess the
Company’s ability to develop reasonable estimates.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2000.
Arlington, Virginia
March 1, 2023

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
ICF International, Inc.

Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of ICF International, Inc. (a Delaware corporation) and subsidiaries (the
“Company”) as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all
material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013
Internal Control—Integrated Frameworkissued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report
dated March 1, 2023 expressed an unqualified opinion on those financial statements.

Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of
the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal
Control Over Financial Reporting (“Management’s Report”). Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness
exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our
opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial
reporting of SemanticBits, LLC and Blanton & Associates, wholly-owned subsidiaries, whose financial statements reflect total assets
and revenues constituting 1.2% and 3.8% percent, respectively, of the related consolidated financial statement amounts as of and for
the year ended December 31, 2022. As indicated in Management’s Report, SemanticBits, LLC and Blanton & Associates were acquired
during 2022. Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal
control over financial reporting of SemanticBits, LLC and Blanton & Associates.

Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect
on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ GRANT THORNTON LLP

Arlington, Virginia
March 1, 2023

F-3

ICF INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)
ASSETS
Current Assets:

Cash and cash equivalents
Restricted cash
Contract receivables, net
Contract assets
Prepaid expenses and other assets
Income tax receivable

Total Current Assets
Property and Equipment, net
Other Assets:
Goodwill
Other intangible assets, net
Operating lease - right-of-use assets
Other assets

Total Assets

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:

Current portion of long-term debt
Accounts payable
Contract liabilities
Operating lease liabilities - current
Finance lease liabilities - current
Accrued salaries and benefits
Accrued subcontractors and other direct costs
Accrued expenses and other current liabilities

Total Current Liabilities
Long-term Liabilities:

Long-term debt
Operating lease liabilities - non-current
Finance lease liabilities - non-current
Deferred income taxes
Other long-term liabilities

Total Liabilities

Commitments and Contingencies (Note 20)

Stockholders’ Equity:

Preferred stock, par value $.001 per share; 5,000,000 shares
authorized; none issued
Common stock, $.001 par value; 70,000,000 shares authorized; 23,771,596 and
23,535,671 shares issued; and 18,883,050 and 18,876,490 shares outstanding at
December 31, 2022 and 2021, respectively
Additional paid-in capital
Retained earnings
Treasury stock, 4,906,209 and 4,659,181 shares at December 31, 2022 and 2021,
respectively
Accumulated other comprehensive loss

Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity

December 31,
2022

December 31,
2021

$

$

$

$

$

$

$

11,257
1,711
232,337
169,088
40,709
11,616
466,718
85,402

1,212,898
126,537
149,066
51,637
2,092,258

23,250
135,778
25,773
19,305
2,381
85,991
45,478
78,036
415,992

533,084
182,251
16,116
68,038
23,566
1,239,047

8,254
12,179
237,684
137,867
42,354
10,825
449,163
52,053

1,046,760
79,645
177,417
44,496
1,849,534

10,000
105,652
39,665
34,901
—
85,517
39,400
61,496
376,631

411,605
191,805
—
41,913
24,110
1,046,064

—

—

23
401,957
703,030

(243,666)
(8,133)
853,211
2,092,258

$

23
384,984
649,298

(219,800)
(11,035)
803,470
1,849,534

The accompanying notes are an integral part of these statements.

F-4

ICF International, Inc. and Subsidiaries
Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)
Revenue
Direct costs
Operating costs and expenses:
Indirect and selling expenses
Depreciation and amortization
Amortization of intangible assets
Total operating costs and expenses

Operating income
Interest, net
Other expense
Income before income taxes
Provision for income taxes
Net income

Earnings per share:

Basic
Diluted

Weighted-average common shares outstanding:

Basic
Diluted

Cash dividends declared per common share

Other comprehensive income (loss), net of tax
Comprehensive income, net of tax

$

$

$
$

$

2022
1,779,964
1,134,422

Years ended December 31,
2021
1,553,048
979,570

$

$

486,863
21,482
28,435
536,780

108,762
(23,281)
(1,501)
83,980
19,737
64,243

3.41
3.38

18,818
19,033

0.56

$

$
$

430,572
19,478
12,492
462,542

110,936
(9,984)
(862)
100,090
28,958
71,132

3.77
3.72

18,868
19,124

0.56

$

$
$

2,902
67,145

$

3,071
74,203

$

2020
1,506,875
972,406

411,612
20,399
13,349
445,360

89,109
(13,712)
(724)
74,673
19,714
54,959

2.92
2.87

18,841
19,135

0.56

(1,962)
52,997

The accompanying notes are an integral part of these statements.

F-5

ICF International, Inc. and Subsidiaries
Consolidated Statements of Stockholders’ Equity

(in thousands)
Balance at January 1, 2020
Net income
Other comprehensive loss
Equity compensation
Exercise of stock options
Issuance of shares pursuant to employee stock purchase
plan and vesting of restricted stock units
Net payments for stock buybacks
Cumulative-effect adjustments for adoption of
accounting principle
Dividends declared
Balance at December 31, 2020
Net income
Other comprehensive income
Equity compensation
Exercise of stock options
Issuance of shares pursuant to employee stock purchase
plan and vesting of restricted stock units
Net payments for stock buybacks
Dividends declared
Balance at December 31, 2021
Net income
Other comprehensive income
Equity compensation
Exercise of stock options
Issuance of shares pursuant to employee stock purchase
plan and vesting of restricted stock units
Net payments for stock buybacks
Dividends declared
Balance at December 31, 2022

Common Stock

Shares

18,868
—
—
—
70

Amount
23
$
—
—
—
—

Additional
Paid-in
Capital
$ 346,795
—
—
17,555
2,652

Retained
Earnings
$ 544,840
54,959
—
—
—

Shares
3,978
—
—
—
—

Accumulated
Other
Comprehensive
Loss

Treasury Stock

Amount
$ (164,963) $

(12,144)
—
(1,962)
—
—

Total
$ 714,551
54,959
(1,962)
17,555
2,652

—
—
—
—

389
(417)

—
—
18,910
—
—
—
8

222
(264)
—
18,876
—
—
—
19

235
(247)
—
18,883

$

$

$

—
—

—
—
23
—
—
—
—

—
—
—
23
—
—
—
—

—
—
—
23

2,056
—

—
—

—
417

—
(31,782)

—
—

2,056
(31,782)

—
—
$ 369,058
—
—
13,230
233

2,463
—
—
$ 384,984
—
—
13,171
602

3,200
—
—
$ 401,957

(513)
(10,555)
$ 588,731
71,132
—
—
—

—
—
(10,565)
$ 649,298
64,243
—
—
—

—
—
(10,511)
$ 703,030

—
—
$ 4,395
—
—
—
—

—
264
—
4,659
—
—
—
—

—
247
—
4,906

—
—

$ (196,745) $

—
—
—
—

—
(23,055)
—

$ (219,800) $

—
—
—
—

—
—
(14,106)
—
3,071
—
—

—
—
—
(11,035)
—
2,902
—
—

(513)
(10,555)
$ 746,961
71,132
3,071
13,230
233

2,463
(23,055)
(10,565)
$ 803,470
64,243
2,902
13,171
602

—
(23,866)
—

$ (243,666) $

—
—
—
(8,133)

3,200
(23,866)
(10,511)
$ 853,211

The accompanying notes are an integral part of these statements.

F-6

ICF International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows

(in thousands)
Cash Flows from Operating Activities

Net income
Adjustments to reconcile net income to net cash provided by operating activities:

Provision for credit losses
Deferred income taxes
Non-cash equity compensation
Depreciation and amortization
Facilities consolidation reserve
Amortization of debt issuance costs
Impairment of long-lived assets
Other adjustments, net
Changes in operating assets and liabilities, net of the effect of acquisitions:

Net contract assets and liabilities
Contract receivables
Prepaid expenses and other assets
Operating lease assets and liabilities, net
Accounts payable
Accrued salaries and benefits
Accrued subcontractors and other direct costs
Accrued expenses and other current liabilities
Income tax receivable and payable
Other liabilities

Net Cash Provided by Operating Activities

Cash Flows from Investing Activities

Capital expenditures for property and equipment and capitalized software
Payments for business acquisitions, net of cash acquired
Proceeds from working capital adjustments related to prior business acquisition

Net Cash Used in Investing Activities

Cash Flows from Financing Activities

Advances from working capital facilities
Payments on working capital facilities
Payments on capital expenditure obligations
Receipt of restricted contract funds
Payment of restricted contract funds
Debt issuance costs
Proceeds from exercise of options
Dividends paid
Net payments for stockholder issuances and buybacks
Payments on business acquisition liabilities
Net Cash Provided by Financing Activities
Effect of Exchange Rate Changes on Cash, Cash Equivalents, and Restricted Cash

(Decrease) Increase in Cash, Cash Equivalents, and Restricted Cash
Cash, Cash Equivalents, and Restricted Cash, Beginning of Period
Cash, Cash Equivalents, and Restricted Cash, End of Period

Supplemental disclosure of cash flow information:

Cash paid during the period for:

Interest
Income taxes

Non-cash investing and financing transactions:

Share repurchases transacted but not settled and paid
Tenant improvements funded by lessor
Acquisition of property and equipment through finance lease
Exercise of options receivable from shareholders

Years ended December 31,
2021

2022

2020

$

64,243

$

71,132

$

54,959

248
7,428
13,171
49,917
(317)
1,305
8,412
1,283

(41,634)
19,732
(20,737)
(1,466)
30,003
(3,337)
6,965
24,742
(1,526)
3,774
162,206

(24,475)
(237,280)
2,911
(258,844)

1,583,936
(1,446,125)
—
15,721
(25,959)
(4,907)
602
(10,547)
(21,218)
(1,132)
90,371
(1,198)

(7,465)
20,433
12,968

22,782
16,476

$

$
$

10,912
8,816
13,230
31,970
(302)
617
7,901
1,099

3,069
(19,021)
4,529
(5,481)
13,479
(5,616)
(38,575)
26,697
(12,802)
(1,449)
110,205

(19,932)
(174,549)
—
(194,481)

881,037
(773,264)
—
264,214
(319,990)
—
2,848
(10,565)
(20,040)
(1,007)
23,233
(511)

(61,554)
81,987
20,433

10,331
34,132

$

$
$

20,253
18,319

— $
$
$
— $

$
552
— $
— $
— $

4,062
(1,865)
17,555
33,748
(288)
710
3,090
964

6,064
54,384
(5,410)
(2,307)
(51,177)
26,810
32,544
(18,198)
5,375
12,125
173,145

(17,683)
(253,265)
—
(270,948)

1,020,451
(870,114)
(1,712)
65,694
(106)
(2,094)
37
(10,551)
(29,726)
(1,924)
169,955
3,353

75,505
6,482
81,987

14,337
15,954

—
3,124
—
2,615

$

$
$

$
$
$
$

The accompanying notes are an integral part of these statements.

F-7

ICF International, Inc. and Subsidiaries

Notes to Consolidated Financial Statements
(dollar amounts in tables in thousands, except share and per share data)

NOTE 1 - BASIS OF PRESENTATION AND NATURE OF OPERATIONS

Basis of Presentation

The accompanying consolidated financial statements include the accounts of ICF International, Inc. (“ICFI”) and its principal

subsidiary, ICF Consulting Group, Inc. (“Consulting,” and together with ICFI, “the Company”), and have been prepared in accordance
with United States (“U.S.”) generally accepted accounting principles (“U.S. GAAP”). Consulting is a wholly owned subsidiary of
ICFI. ICFI is a holding company with no operations or assets other than its investment in the common stock of Consulting. All other
subsidiaries of the Company are wholly owned by Consulting. All significant intercompany transactions and balances have been
eliminated.

Nature of Operations

The Company provides professional services and technology-based solutions, including management, marketing, technology,

and policy consulting and implementation services, in the areas of energy, environment, and infrastructure; health, education, and
social programs; safety and security; and consumer and financial. The Company offers a full range of services to clients throughout
the entire life cycle of a policy, program, project, or initiative, from research and analysis, assessment and advice to design and
implementation of programs and technology-based solutions, and the provision of engagement services and programs.

The Company’s major clients are U.S. federal government departments and agencies, most significantly the Department of

Health and Human Services, Department of State, and Department of Defense. The Company also serves U.S. state (including
territories) and local government departments and agencies, international governments, and commercial clients worldwide.
Commercial clients include airlines, airports, electric and gas utilities, health care companies, banks and other financial services
companies, transportation, travel and hospitality firms, non-profit associations, manufacturing firms, retail chains, and distribution
companies. The term “federal” or “federal government” refers to the U.S. federal government, and “state and local” or “state and local
government” refers to U.S. state (including territories) and local governments, unless otherwise indicated.

The Company, incorporated in Delaware, is headquartered in Reston, Virginia. It maintains additional offices throughout the

world, including 58 offices in the U.S. and U.S. territories and 24 offices in key markets outside the U.S., including offices in the
United Kingdom (“U.K.”), Belgium, India, and Canada.

Reclassification

Certain immaterial amounts in the consolidated statements of comprehensive income have been reclassified to conform to the
current year’s presentation. To be consistent with the current presentation of interest, net, the Company reclassified $0.3 million and
$0.2 million in interest income for the years ended December 31, 2021 and 2020, respectively, from “Other expense” to “Interest,
net”.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the
consolidated financial statements, and the reported amounts of revenue and expenses during the reporting periods. Areas of the
consolidated financial statements where estimates may have the most significant effect include contractual and regulatory reserves,
valuation and lives of tangible and intangible assets, contingent consideration related to business acquisitions, impairment of goodwill
and long-lived assets, accrued liabilities, revenue recognition (including estimates of variable considerations in determining the total
contract price and allocation of performance obligations), the remaining costs-to-complete fixed-price contracts, bonus and other
incentive compensation, stock-based compensation, reserves for tax benefits and valuation allowances on deferred tax assets,
provisions for income taxes, collectability of receivables, and loss accruals for litigation. Actual results experienced by the Company
may differ from management’s estimates.

Revenue Recognition

The Company primarily provides services and technology-based solutions for clients that operate in a variety of markets and the
solutions may span the entire program life cycle, from initial research and analysis to the design and implementation of solutions. The
Company enters into agreements with clients that create enforceable rights and obligations and for which it is probable that the
Company will collect the consideration to which it will be entitled as services and solutions are transferred to the client. Except in
certain narrowly defined situations, the Company’s agreements with its clients are written and revenue is generally not recognized on

F-8

oral or implied arrangements. The Company recognizes revenue based on the consideration specified in the applicable agreement and
excludes from revenue amounts collected on behalf of third parties. Accordingly, sales and similar taxes which are collected on behalf
of third parties are excluded from the transaction price.

The Company evaluates whether two or more agreements should be accounted for as one single contract and whether combined

or single agreements should be accounted for as more than one performance obligation. For most contracts, the client requires the
Company to perform a number of tasks in providing an integrated output for which the client has contracted, and, hence, contracts of
this type are tracked as having only one performance obligation since a substantial part of the Company’s promise is to ensure the
individual tasks are incorporated into a combined output in accordance with contract requirements. When contracts are separated into
multiple performance obligations, the Company allocates the total transaction price to each performance obligation based on the
estimated relative standalone selling prices of the promised services underlying each performance obligation. The Company generally
provides customized solutions in which the pricing is based on specific negotiations with each client, and, in these cases, the Company
uses a cost-plus margin approach to estimate the standalone selling price of each performance obligation. Certain long-term contracts
contain award fees, incentive fees or other provisions that can either increase or decrease the transaction price. These variable amounts
are generally awarded at the completion of a contractually stipulated performance assessment period based on the achievement of
performance metrics, program milestones or cost targets, and the amount awarded may be subject to client discretion. Variable
consideration is estimated based on the most likely amount. Once the Company selects a method to estimate variable consideration, it
applies that method consistently. Estimates of variable consideration will be constrained only to the extent that it is probable that a
significant reversal in the amount of cumulative revenue recognized will not occur.

The Company evaluates contractual arrangements to determine whether revenue should be recognized on a gross versus net

basis. The Company’s assessment is based on the nature of the promise to the client. In most cases, the Company itself agrees to
provide specified services to the client as a principal and revenue is recognized on a gross basis. In certain instances, the Company
acts as an agent and merely arranges for another party to provide services to the client and revenue is recognized on a net basis in
reflection of the fact that the Company does not control the goods or services provided to the client by the other party.

Long-term contracts typically contain billing terms that provide for invoicing monthly or upon completion of milestones, and
payment on a net 30-day basis. Therefore, the timing of billings and cash receipts may differ from the timing of revenue recognition
resulting in either contract assets or contract liabilities. Exceptions to monthly billing terms are to ensure that the Company performs
satisfactorily rather than representing a significant financing component. For cost-based contracts, the Company’s performance is
evaluated during a contractually stipulated performance period and, while contract costs may be billed on a monthly basis, the
Company is generally permitted to bill for incentive or award fees only after the completion of the performance assessment period,
which may occur quarterly, semi-annually or annually, and after the client completes the performance assessment. Fixed-price
contracts may provide for milestone billings based on the attainment of specific project objectives rather than for billing on a monthly
basis. Moreover, contracts may require retention or hold backs that are paid at the end of the contract to ensure that the Company
performs in accordance with requirements. The Company does not assess whether a contract contains a significant financing
component if the Company expects, at contract inception, that the period between payment by the client and the transfer of promised
services to the client will be one year or less.

The Company generally recognizes revenue over time as control is transferred to a client, based on the extent of progress

towards satisfaction of the performance obligation. The selection of the method used to measure progress requires judgment and is
dependent, among other factors, on the contract type and the nature of the services provided.

For time-and-materials contracts, the Company uses the right to invoice practical expedient to determine the revenue earned

based on hours worked in contract performance at negotiated billing rates. Fixed-price level-of-effort contracts are substantially
similar to time-and-materials contracts except that the Company is required to deliver a specified level of effort over a stated period of
time. For these contracts, the Company determines the revenue earned using contract hours worked at negotiated bill rates as the
Company delivers the contractually required workforce.

For cost-based contracts, the Company recognizes revenue based on contract costs incurred, as the Company becomes
contractually entitled to reimbursement of the contract costs, plus a most likely estimate of award or incentive fees earned on those
costs even though final determination of fees earned occurs after the contractually-stipulated performance assessment period ends.

F-9

For fixed-price contracts, the Company uses the percentage-of-completion method to estimate the amount of revenue, based on

the ratio of actual costs incurred to total estimated costs, provided that costs incurred (an input method) represents a reasonable
measure of progress towards the satisfaction of a performance obligation and transfer of control to the customer. This method provides
a faithful depiction of the transfer of value to the client when the Company is satisfying a performance obligation that entails
integration of tasks for a combined output, which requires the Company to coordinate the work of employees, subcontractors and
delivery of other contract costs. Contract costs that are not reflective of the Company’s progress toward satisfying a performance
obligation are not included in the calculation of the measure of progress. When this method is used, the changes in estimated costs to
complete the obligations result in adjustments to revenue on a cumulative catch-up basis, which causes the effect of revised estimates
for prior periods to be recognized in the current period. Changes in these estimates may routinely occur over contract performance for
a variety of reasons, which include: changes in contract scope; changes in contract cost estimates due to unanticipated cost growth or
reassessments of risks impacting costs; changes in estimated incentive or award fees; or performing better or worse than previously
estimated.

In some fixed-price service contracts, the Company performs services of a recurring nature, such as maintenance and other
services of a “stand ready” nature. For these contracts, the Company has the right to consideration in an amount that corresponds
directly with the value that the client has received. Therefore, the Company records revenue on a time-elapsed basis to reflect the
transfer of control to the client throughout the contract.

Contracts may be modified to reflect changes in contract specifications and requirements, and these changes may create new

enforceable rights and obligations. Modifications that are for services that are not distinct from the existing agreement due to the
significant integration service that the Company provides are accounted for as part of an existing performance obligation. The effect of
these modifications on the transaction price and the Company’s measure of progress in fulfilling the performance obligation to which
they relate is recognized as an adjustment to revenue on a cumulative catch-up basis. Revenue from modifications that create new,
distinct performance obligations is recognized based on the Company’s progress in fulfilling the requirements of the new obligations.

For construction-type fixed-price contracts in which the estimated cost to perform exceeds the consideration to be received, the
Company accrues for the entire estimated loss during the period in which the loss is determined by recording additional direct costs.

For performance obligations that are satisfied over time, the Company recognizes the cost to fulfill contracts when incurred,

unless the costs are within the scope of another topic in which case the guidance of that topic is applied. The Company evaluates
incremental costs of obtaining a contract and, if they are recoverable from the client and relate to a specific future contract, they are
deferred and recognized over contract performance or the estimated life of the customer relationship if renewals are expected. The
Company expenses these costs when incurred if the amortization period is one year or less.

Unfulfilled performance obligations represent amounts expected to be earned on contracts and do not include the value of
negotiated, unexercised contract options, which are classified as marketing offers. Indefinite delivery/indefinite quantity and similar
arrangements provide a framework for the client to issue specific tasks, delivery or purchase orders in the future and these
arrangements are considered marketing offers until a specific order is executed.

Revenue recognition entails the use of significant judgment, including, but not limited to, the following: evaluating agreements

in terms of the number and nature of performance obligations; determining the appropriate method for measuring progress to
satisfaction of obligations; determining if the Company is acting as a principal or an agent, and preparing estimates in terms of the
amount of progress that the Company has made. For many fixed-price contracts, in particular, the Company estimates the proportion
of total revenue earned using the ratio of contract costs incurred to total estimated contract costs, which requires the Company to
prepare and, as necessary, revise estimates, as work progresses, of the total contract costs required to satisfy each respective
performance obligation. Moreover, some of the Company’s contracts include variable consideration, which requires the Company to
estimate and, as necessary, revise the most likely amounts that will be earned over the respective performance assessment periods. For
these obligations, changes in estimates result in cumulative catch-up adjustments and may have a significant impact on earnings
during a given period.

The Company’s operating cycle for long-term contracts may be greater than one year and is measured by the average time
between the inception and completion of those contracts. Contract-related assets and liabilities are classified as current assets and
current liabilities. Significant balance sheet accounts related to the revenue recognition cycle are as follows:

Contract receivables, net – Contract receivables represent amounts billed and due from clients in accordance with respective

contractual terms. The amounts due are stated at their net realizable value. The Company estimates an allowance for estimated credit
loss to reflect the amount of receivables that will not be collected. The Company considers a number of factors in estimating the
amount of the allowance, including knowledge of a client’s financial condition, its historical collection experience, and other factors
relevant to assessing the collectability of the receivables. The Company writes off specific contract receivables when such amounts are
determined to be uncollectible.

F-10

Contract assets – Contract assets include unbilled amounts typically resulting from revenue recognized on long-term contracts

when it exceeds the amounts billed. Contract assets include retainages until the Company has met the contract-stipulated requirements
for payment. Contract assets are reported in a net position on a contract-by-contract basis each period even though individual contracts
may contain multiple performance obligations. On a contract-by-contract basis, amounts do not exceed their net realizable value.

Contract liabilities – Contract liabilities represent advance payments received and billings in excess of revenue recognized on

contracts. Contact liabilities are reported in a net position on a contract by contract basis each period even though individual contracts
may contain multiple performance obligations.

Cash and Cash Equivalents

The Company considers cash on deposit and all highly liquid investments with original maturities of three months or less when

purchased to be cash and cash equivalents.

Restricted Cash

The Company has restricted cash representing amounts held in escrow accounts and/or not readily available due to contractual

restrictions.

Property and Equipment

Property and equipment are carried at cost and are depreciated using the straight-line method over their estimated useful lives,

which range from two to seven years. Leasehold improvements are amortized on a straight-line basis over the shorter of the economic
life of the improvement or the related lease term.

Goodwill and Other Intangible Assets

The purchase price of an acquired business is allocated to the tangible assets and separately identifiable intangible assets
acquired, less liabilities assumed, based on their respective fair values, with the excess recorded as goodwill. Goodwill represents the
excess of the purchase consideration over the fair value of net assets of businesses acquired. Goodwill and intangible assets acquired
in a business combination and deemed to have an indefinite useful life are not amortized, but instead are reviewed for impairment
annually, or more frequently if impairment indicators arise. Intangible assets with estimable useful lives are amortized over such lives
and reviewed for impairment if impairment indicators arise.

The Company performs its annual goodwill impairment test as of October 1 of each year. As its business is highly integrated
and all of its components have similar economic characteristics, the Company has concluded it has one aggregated reporting unit at
the consolidated entity level. The Company assesses goodwill at the reporting unit. If, after opting to complete a qualitative
assessment, the Company determines that it is more likely than not that the estimated fair value of the reporting unit exceeded its
carrying amount, it may conclude that no impairment exists. If the Company concludes otherwise, a goodwill impairment test is
performed, which includes a comparison of the reporting unit’s fair value to the carrying amount and recognizing, as an impairment
loss, the difference of the reporting unit’s fair value and the carrying amount of goodwill.

The Company’s qualitative analysis as of October 1, 2022 included macroeconomic, industry and market specific
considerations, financial performance indicators and measurements, and other factors. Based on this qualitative assessment, the
Company determined that it is more likely than not that the fair value of its reporting unit exceeded its carrying amount, and thus an
additional quantitative impairment test was not required to be performed. Therefore, based on management’s review, a goodwill
impairment loss was not required for 2022. Historically, the Company has not recorded any goodwill impairment losses.

Long-Lived Assets

The Company reviews its long-lived assets, including property and equipment, operating lease right-of-use (“ROU”) assets, and

amortizable intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the
long-lived asset group may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the
carrying amount of the long-lived asset group being evaluated, a loss is recognized for any excess of the carrying amount over the fair
value of the asset group. The Company recognized impairment expense, included in indirect and selling expenses, of $8.4 million,
$7.9 million, and $3.1 million during the years ended December 31, 2022, 2021, and 2020, respectively, related to operating lease
right-of-use assets and leasehold improvements.

F-11

Leases

The Company uses leases to obtain use of a variety of different resources, including those for the use of facilities or property

and equipment. The Company determines if an arrangement is a lease at inception and recognizes a right-of-use asset and lease
obligation for all leases greater than twelve months based on the present value of the future minimum lease payments as of the
commencement date, excluding any lease incentives and initial costs incurred to obtain the lease. Since most lease agreements do not
provide an implicit rate, the Company uses its incremental borrowing rate as of the commencement date, based on publicly available
yields adjusted for company-specific considerations and terms, in estimating the present value of future payments.

Lease terms, for the purpose of determining each lease’s present value, include options to extend or terminate the lease if it is

reasonably certain and economically reasonable that the Company will exercise that option. Lease costs from minimum lease
payments are recognized on a straight-line basis over the lease term.

The leases may contain both lease and non-lease components, which are generally accounted for separately. For office
equipment leases (primarily copier leases), the Company elected to account for the lease and non-lease components as a single lease
component and not recognize right-of-use assets and lease liabilities for leases with a term less than twelve months.

Operating leases are included in operating lease right-of-use assets and operating lease liabilities (current and non-current) and
finance leases are included in property and equipment, net and finance lease liabilities (current and non-current) on the consolidated
balance sheets.

Capitalized Software

The Company capitalizes certain costs to develop enhancements and upgrades to internal-use software that are incurred
subsequent to the preliminary project stage. Amortization expense is recorded on a straight-line basis over the expected economic life
of the software, typically lasting three to five years. As of December 31, 2022, and 2021, capitalized software, net of accumulated
amortization, totaled $19.0 million and $14.5 million, respectively, and is included as part of “other assets” on the consolidated
balance sheets.

Stock-based Compensation

The Company recognizes stock-based compensation expense related to share-based payments to employees, including grants of

employee stock options, restricted stock awards, restricted stock units (“RSUs”), and cash-settled restricted stock units (“CSRSUs”)
on a straight-line basis over the requisite service period, which is generally the vesting period. The Company recognizes expense for
performance-based share awards (“PSAs”), which have both performance and service conditions, on a straight-line basis over the
three-year performance period. Non-employee director awards are granted annually for board-related services and therefore expensed
over the service period.

Stock-based compensation expense is based on the estimated fair value of the instruments on the grant date and the estimated

number of shares the Company ultimately expects will vest. The Company estimates the rate of future forfeitures based on factors
which include the historical forfeiture experience for each applicable employee class under the assumption that the rate of future
forfeitures will be similar to that experienced in the past. In addition, the estimation of PSAs that will ultimately vest requires
judgment based on the performance and market conditions that will be achieved over the performance period. Changes to these
estimates are recorded as a cumulative adjustment in the period estimates are revised.

The fair value of stock options, restricted stock awards, RSUs, PSAs, and non-employee director awards is estimated based on

the fair value of a share of common stock at the grant date. The fair value of PSAs is estimated using a Monte Carlo simulation model.

CSRSUs are settled only in cash payments. The cash payment is based on the fair value of the Company’s stock price at the

vesting date, calculated by multiplying the number of CSRSUs vested by the Company’s closing stock price on the vesting date,
subject to a maximum payment cap and a minimum payment floor. The Company treats these awards as liability-classified awards,
and, therefore, accounts for them at fair value estimated based on the closing price of the Company’s stock at the reporting date.

Derivative Instruments

Derivative instruments include interest rate swaps and foreign currency hedge contracts. Derivative instruments designated as
cash flow hedges are recorded on the consolidated balance sheets at fair value as of the reporting date and reclassified to earnings in
the period that the hedged instruments affect earnings, and the effective portion of the hedge is recorded in other comprehensive
income (loss), net of tax, on the consolidated statements of comprehensive income. Management reviews the effectiveness of the
hedges on a quarterly basis.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences
between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be
recovered or settled. The Company evaluates its ability to benefit from all deferred tax assets and establishes valuation allowances for
amounts it believes will more likely than not be unrealizable. For uncertain tax positions, the Company uses a more-likely-than-not
recognition threshold based on the technical merits of the income tax position taken. Income tax positions that meet the more-likely-
than-not recognition threshold are measured in order to determine the tax benefit recognized in the financial statements. Penalties, if
probable and reasonably estimable, and interest expense related to uncertain tax positions are not recognized as a component of
income tax expense but recorded separately in indirect expenses and interest expense, respectively.

F-12

Treasury Shares

Treasury shares are accounted for under the cost method.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) includes foreign currency translation adjustments arising from the use of differing exchange

rates from period to period, the gain on the sale of an interest rate hedge agreement designated as a cash flow hedge, and the changes
in fair value of interest rate agreements designated as cash flow hedges, net of taxes. The financial positions and results of operations
of the Company’s foreign subsidiaries are based on the local currency as the functional currency and are translated to U.S. dollars for
financial reporting purposes. Assets and liabilities of the subsidiaries are translated at the exchange rate in effect at each balance sheet
date. Income statement accounts are translated at the average rate of exchange prevailing during the period. Translation adjustments
are reported in accumulated other comprehensive loss included in stockholders’ equity in the Company’s consolidated balance sheets.

Acquisition-Related Costs

Costs related to acquisitions include professional fees for legal, financial, and other advisory services and are expensed in the

period that they are incurred.

Segment, Customer and Geographic Information

The Company operates in one segment based on the consolidated information used by its chief operating decision-maker in
evaluating the financial performance of its business and allocating resources. This single segment represents the Company’s core
business, which is providing professional services. Although the Company disaggregates its revenue by client market areas and type,
the Company does not manage its business or allocate resources based on client market or type.

Approximately $980.4 million, $735.0 million, and $667.0 million of the Company’s revenue for the years 2022, 2021, and
2020, respectively, was derived under prime contracts and subcontracts with agencies and departments of the federal government
representing 55%, 47%, and 44% of total revenue, respectively. No other customer accounted for 10% or more of the Company’s
revenue during the years ended 2022, 2021, and 2020.

The Company provides services to U.S. and international clients, and revenue is attributed to a particular geographic area based
on the administrative location of the client that awarded the contract. The Company’s revenue generated from international clients as a
percentage of total revenue was approximately 8%, 11%, and 13% for the years 2022, 2021, and 2020, respectively.

At December 31, 2022 and 2021, long-lived assets held internationally were 7% and 15% of total long-lived assets, respectively.

Risks and Uncertainties

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash

equivalents, derivative financial instruments, and contract receivables.

The Company’s domestic bank accounts are insured up to $250,000 by the Federal Deposit Insurance Corporation. As of

December 31, 2022, the Company had $5.2 million in its accounts that exceeded the insured limit. The majority of the Company’s
cash transactions are processed through one U.S. commercial bank. Cash held domestically in excess of daily requirements is used to
reduce any amounts outstanding under the Company’s Credit Facility.

As of December 31, 2022 and 2021, the Company held approximately $8.4 million and $20.1 million, respectively, of cash and

restricted cash in foreign bank accounts.

The Company enters into derivative financial instruments with financial institutions that meet certain credit guidelines, and

limits its risks by continuously monitoring the credit rating of the institutions.

The Company’s receivables consist principally of amounts due from agencies and departments of the federal government, state

and local governments, and international governments, as well as from commercial organizations. The credit risk, with respect to
federal and other government clients, is limited due to the creditworthiness of the respective governmental entity. Amounts due for
work performed as a subcontractor also represent limited credit risk when the client is performing as the prime contractor on a
government contract due to the ultimate creditworthiness of the end client. Receivables from commercial clients generally pose a
greater credit risk, and, as a result, are subject to ongoing monitoring. The Company extends credit in the normal course of operations
and does not require collateral from its clients.

The Company’s contracts with the federal government are subject to audit by agencies and departments of the federal
government. Such audits determine, among other things, whether adjustments to invoices previously rendered are required under
regulations as well as the underlying terms of each respective contract.

F-13

Recent Accounting Pronouncements

Accounting Pronouncements Adopted

Reference Rate Reform

In March 2020, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2020-04, Facilitation

of the Effects of Reference Rate Reform on Financial Reporting. The standard is intended to provide temporary optional expedients
and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease accounting and financial reporting
burdens related to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered
rates to alternative reference rates. The provisions of this ASU are elective and apply to all entities, subject to meeting certain criteria,
that have debt or hedging contracts, among other contracts, that reference LIBOR or another reference rate expected to be
discontinued because of reference rate reform. Entities can elect to not apply certain modification accounting requirements to contracts
affected by reference rate reform if certain criteria are met. Also, entities can elect various optional expedients that would allow it to
continue to apply hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. This
guidance was effective beginning on March 12, 2020 and entities may elect to apply the amendments prospectively through December
31, 2022, the sunset date. In December 2022, the FASB issued ASU 2022-06 Reference Rate Reform (Topic 848): Deferral of the
Sunset Date of Topic 848 that extended the sunset date from December 31, 2022 to December 31, 2024.

During the third quarter of 2022, the Company amended certain interest rate swap contracts to change the benchmark rate from
LIBOR to term Secured Overnight Financing Rate (“SOFR”) based interest pricing conventions. Contemporaneously, the Company
adopted ASU 2020-04 and elected to apply the optional expedient to consider the amended swap contracts as a continuation of the
existing arrangements. The optional expedient did not result in a material impact on the Company’s operating results, financial
position, or cash flows.

As of December 31, 2022, the Company has one interest rate swap contract with a variable interest rate that references LIBOR.

The contract expires on August 31, 2023. See Note 12 - Derivative Instruments and Hedging Activities.

NOTE 3 - RESTRICTED CASH

The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported within the consolidated

balance sheets at December 31, 2022 and 2021 to the total cash, cash equivalents, and restricted cash shown in the consolidated
statements of cash flows for the years ended December 31, 2022, 2021, and 2020:

Cash and cash equivalents
Restricted cash (1)
Total cash, cash equivalents, and restricted cash
shown in the consolidated statement of cash flows

2022

2021

2020

Beginning
8,254
$
12,179

Ending

$

11,257
1,711

Beginning
13,841
$
68,146

Ending

$

8,254
12,179

Beginning
6,482
$
—

Ending

$

13,841
68,146

$

20,433

$

12,968

$

81,987

$

20,433

$

6,482

$

81,987

(1) Under a contract with a customer that commenced in the fourth quarter of fiscal year 2020, the Company received advance payments to be
used to pay providers of services to the customer, a separate third party. The advanced payments are treated as restricted cash - current as the
Company is required under the contract to distribute the advanced funds to the third-party providers of services or return the advanced funds to
the customer. Because the Company receives the advance payments from the customer, which must be refunded to the customer or remitted to
a third party, the cash receipts are treated as liabilities rather than receipts for the provision of goods or services. Therefore, these cash receipts
are presented in the consolidated statements of cash flows as financing cash inflows, “Receipt of restricted contract funds,” with the
subsequent payments classified as financing cash outflows, “Payment of restricted contract funds.” See Note 9 - Accrued Expenses and Other
Current Liabilities for the corresponding liability.

NOTE 4 - CONTRACT RECEIVABLES, NET

Contract receivables, net consisted of the following as of December 31:

Billed receivables
Allowance for expected credit losses
Contract receivables, net

2022

2021

$

$

238,449
(6,112)
232,337

$

$

245,425
(7,741)
237,684

On December 23, 2022, the Company entered into a Master Receivables Purchase Agreement (the “MRPA”) with MUFG Bank,

Ltd. (“MUFG”) for the sale of certain eligible billed receivables from time to time. The purchase price of the receivables is equal to
the net invoice amount minus a discount. The receivables are sold without recourse and the Company does not retain any ongoing
financial interest in the transferred receivables other than providing servicing activities. The Company accounts for the transfers as
sales under ASC 860, Transfers and Servicing, derecognizes the receivables from its consolidated balance sheets at the date of the
sale, and includes the cash received from MUFG as part of cash flows from operating activities on its consolidated statement of cash

F-14

flows. During the year ended December 31, 2022, the Company sold $10.0 million in billed receivables. For the year ended December
31, 2022, the discount on the sale of receivables under the MRPA totaled less than $0.1 million and is included as part of “indirect and
selling expenses” on the consolidated statements of comprehensive income.

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

Leasehold improvements
Software
Furniture and equipment
Computers

Accumulated depreciation and amortization
Total property and equipment, net

2022

2021

58,131
17,926
28,800
45,541
150,398
(64,996)
85,402

$

$

34,639
24,363
25,115
44,128
128,245
(76,192)
52,053

$

$

Depreciation and amortization expense for the years ended December 31, 2022, 2021, and 2020, was approximately $21.5

million, $19.5 million, and $20.4 million, respectively.

NOTE 6 - GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the fiscal years ended December 31 were as follows:

Balance as of January 1, 2022
Goodwill resulting from business combination - ESAC
Goodwill resulting from business combination - Creative Systems and Consulting
Goodwill resulting from business combination - SemanticBits, LLC
Goodwill resulting from business combination - Blanton & Associates
Effect of foreign currency translation
Balance as of December 31, 2022

2022

2021

1,046,760
87
1,939
159,677
9,712
(5,277)
1,212,898

$

$

909,913
11,226
126,118
—
—
(497)
1,046,760

$

$

Other Intangible Assets

Intangible assets with definite lives are primarily amortized over periods ranging from approximately 1 to 10 years. The
weighted-average period of amortization for all intangible assets, calculated as of December 31, 2022, is 6.9 years. The customer-
related intangible assets, which consist of customer contracts, backlog, and non-contractual customer relationships, are being
amortized based on estimated cash flows and respective estimated economic benefit of the assets. The weighted-average period of
amortization of the customer-related intangibles calculated as of December 31, 2022 is 6.9 years. Intangible assets related to
developed technology are being amortized on an accelerated basis over a weighted-average period, calculated as of December 31,
2022, of 9.2 years. Intangible assets with an indefinite life consist of a domain name.

Other intangibles consisted of the following at December 31:

Gross
Carrying
Value

2022

Accumulated
Amortization

Customer-related
Developed technology
Trade name
Total amortizable intangible assets
Intangible with indefinite life
Total other intangible assets

$

$

240,591
4,480
1,180
246,251
94
246,345

$

$

(118,412)
(512)
(884)
(119,808)
—
(119,808)

$

$

Net Carrying
Value

122,179
3,968
296
126,443
94
126,537

F-15

Gross
Carrying
Value

2021

Accumulated
Amortization

Customer-related
Developed technology
Total amortizable intangible assets
Intangible with indefinite life
Total other intangible assets

$

$

167,577
5,411
172,988
95
173,083

$

$

(92,494)
(944)
(93,438)
—
(93,438)

$

$

Net Carrying
Value

75,083
4,467
79,550
95
79,645

Aggregate amortization expense for the years ended December 31, 2022, 2021, and 2020, was approximately $28.4 million,
$12.5 million, and $13.3 million, respectively. The estimated future amortization expense relating to intangible assets is as follows:

Year ending December 31,
2023
2024
2025
2026
2027
Thereafter
Total

NOTE 7 – LEASES

$

$

35,992
35,068
30,211
16,607
1,441
7,124
126,443

The Company has operating and finance leases for facilities and equipment which have remaining terms ranging from 1 to 16
years. The leases may include options to extend the lease periods for up to 5 years at rates approximating market rates and/or options
to terminate the leases within 1 year. The leases may include a residual value guarantee or a responsibility to return the property to its
original state of use. A limited number of leases contain provisions that provide for rental increases based on consumer price indices.
The change in lease cost resulting from changes in these indices was included within variable lease cost.

The Company’s lease cost is recognized on a straight-line basis over the lease term and is primarily included within indirect and

selling expenses on the consolidated statements of comprehensive income. Lease cost consisted of the following:

Operating lease cost
Finance lease cost - amortization of right-of-use assets
Finance lease cost - interest
Short-term lease cost
Variable lease cost
Sublease income
Total lease cost

Year Ended December 31,

2022

2021

2020

37,889
598
179
509
146
(92)
39,229

$

$

35,469
—
—
453
43
—
35,965

$

$

37,874
—
—
1,421
53
—
39,348

$

$

F-16

Future minimum lease payments under non-cancellable operating and finance leases as of December 31, 2022 were as follows:

Operating

Finance

December 31, 2023
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027
Thereafter
Total future minimum lease payments
Less: Interest
Total operating lease liabilities

Operating lease liabilities - current
Operating lease liabilities - non-current
Total operating lease liabilities

Finance lease liabilities - current
Finance lease liabilities - non-current

Total finance lease liabilities

$

$

$

$

$

$

21,441
26,863
24,790
21,389
15,294
138,885
248,662
(47,106)
201,556

December 31, 2022

19,305
182,251
201,556

2,381
16,116
18,497

$

$

$

$

$

$

2,967
2,967
2,967
2,967
2,967
5,933
20,768
(2,271)
18,497

December 31,
2021

Other information related to operating and finance leases is as follows:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
Right-of-use assets obtained in exchange for new operating lease liabilities
Property and equipment obtained in exchange for finance lease liabilities
Weighted-average remaining lease term - operating leases
Operating leases
Finance leases
Weighted-average discount rate - operating leases
Operating leases
Finance leases

Year Ended December 31,
2022

2021

$
$
$

40,123
13,906
18,319

$
$

11.7
7.0

3.3%
3.4%

The change in operating lease right-of-use assets and lease liabilities are presented within cash flows from operating activities

on the consolidated statements of cash flows.

NOTE 8 - ACCRUED SALARIES AND BENEFITS

Accrued salaries and benefits consisted of the following at December 31:

Bonuses, liability-classified awards, and commissions
Salaries
Paid time off and leave
Social security tax deferral
Medical
Payroll taxes and withholdings
Other
Total accrued salaries and benefits

2022

2021

$

$

26,930
31,142
16,144
—
5,833
1,363
4,579
85,991

$

$

26,443
25,397
13,574
10,457
4,098
1,022
4,526
85,517

F-17

34,901
191,805
226,706

—
—
—

28,932
90,046
—

11.4
—

3.2%
—

NOTE 9 - ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following at December 31:

Deposits
Restricted contract funds
IT and software licensing costs
Taxes and insurance premiums
Facilities rental and lease exit costs
Interest
Professional services
Dividends
Contingent and contractual liabilities from acquisitions
Interest rate swap liability - current
Cash collected not yet remitted to purchaser of billed receivables
Other accrued expenses and current liabilities
Total accrued expenses and other current liabilities

NOTE 10 - LONG-TERM DEBT

$

$

2022

2021

32,384
1,701
1,609
6,633
2,043
363
3,617
2,631
—
—
6,164
20,891
78,036

$

$

21,088
12,165
1,702
5,267
1,291
212
3,068
2,643
1,245
3,026
—
9,789
61,496

On May 6, 2022, the Company entered into the Restated Credit Agreement with a group of lenders with (a) PNC Bank, National
Association as the Administrative Agent and (b) PNC Capital Markets LLC, BOFA Securities, Inc., TD Securities (USA) LLC, Wells
Fargo Securities, LLC and Citizens Bank, N.A., as joint lead arrangers. The various facilities under the Restated Credit Agreement are
referred to as the “Credit Facility”. The Restated Credit Agreement amended and restated the Company’s prior credit agreement (the
“Existing Credit Agreement”) to, among other things: (a) maintain the existing $600 million revolving credit facility (together and
inclusive of a $75 million swing line sublimit and $100 million sublimit for letters of credit); (b) increase the existing term loan
facility from $200 million to $300 million; (c) provide for a new delayed draw term loan facility of $400 million; (d) maintain the
existing incremental credit facility to make, subject to approval of the lenders making such loans, incremental term or revolving credit
loan(s) in the aggregate principal amount of not more than $300 million; (e) increase the maximum Consolidated Leverage Ratio (as
such term is defined in the Restated Credit Agreement) from 4.00 to 1.00 to 4.50 to 1.00 (with temporary increases to 5.00 to 1.00 for
the three fiscal quarters following a "Material Permitted Acquisition", as such term is defined in the Restated Credit Agreement); (f)
maintain the minimum Consolidated Interest Coverage Ratio (as such term is defined in the Restated Credit Agreement) of 3.00 to
1.00; (g) increase the foreign currency debt limit in Euro and Sterling Pounds from $30 million equivalent to $200 million equivalent;
(h) modify LIBOR based interest pricing conventions with SOFR based interest pricing conventions; (i) extend the maturity date of
the Credit Facility until May 6, 2027; (j) incorporate various provisions and conventions encouraged by the Loan Syndication and
Trade Association; and (k) modify certain definitions and certain covenants.

Under the Restated Credit Agreement, the Company may, at its discretion, borrow funds under the Credit Facility at interest

rates based on both term SOFR (i.e., 1, 3, or 6-month rates) and the Base Rate (as defined herein), plus their applicable margins. The
Base Rate is a fluctuating rate of interest equal to the highest of (a) the Overnight Bank Funding Rate (as defined in the Restated
Credit Agreement), plus 0.5%, (b) the Prime Rate (as defined in the Restated Credit Agreement) and (c) the Daily Simple SOFR Rate
(as defined in the Restated Credit Agreement) plus 1%, all as then adjusted to include the Applicable Margin (as defined in the
Restated Credit Agreement) as then in effect (and as determined pursuant to the then-current Consolidated Leverage Ratio).

The Credit Facility is collateralized by substantially all the assets of the Company and its material domestic subsidiaries and

requires that the Company remain in compliance with certain financial and non-financial covenants including, but not limited to the
Consolidated Leverage Ratio and the Consolidated Interest Coverage Ratio. As of December 31, 2022, the Company was in
compliance with its covenants. The Credit Facility also includes other terms and conditions, covenants, and other provisions of the
Restated Credit Agreement that are materially consistent with the Existing Credit Agreement.

As of December 31, 2022, the Company had $561.4 million of long-term debt outstanding from the Credit Facility, unused

delayed draw term loan facility of $180.0 million (available through May 6, 2023, with an additional six-month extension upon
request by the Company), and unused borrowing capacity of $545.4 million from the available $600.0 million revolving line of credit
under the Credit Facility. The unused borrowing capacity is inclusive of six outstanding letters of credit totaling $2.0 million.
Considering the financial, performance-based limitations, available borrowing capacity was $440.0 million as of December 31, 2022.

F-18

As of December 31, 2022 and 2021, long-term debt consisted of the following:

Term Loan
Delayed-Draw Term Loan
Revolving Credit
Total before debt issuance costs
Unamortized debt issuance costs

Current portion of long-term debt
Long-term debt - non-current
Total

December 31, 2022

December 31, 2021

Average
Interest Rate

Outstanding
Balance

Average
Interest Rate

Outstanding
Balance

3.3%

$

$

$

$

288,750
220,000
52,616
561,366
(5,032)
556,334

23,250
533,084
556,334

1.6%

$

$

$

$

182,500
—
241,055
423,555
(1,950)
421,605

10,000
411,605
421,605

Future scheduled repayments of term loan principal are as follows:

Payments due by

Term Loan

Delayed-Draw
Term Loan

Revolving
Credit

December 31, 2023
December 31, 2024
December 31, 2025
December 31, 2026
December 31, 2027
Total

Debt Issuance Cost

$

$

15,000
15,000
20,625
22,500
215,625
288,750

$

$

8,250
11,000
15,125
16,500
169,125
220,000

$

$

— $
—
—
—
52,616
52,616

$

Total

23,250
26,000
35,750
39,000
437,366
561,366

The Company’s debt issuance costs are amortized over the term of indebtedness. The balance of net debt issuance costs at

December 31, 2022 and 2021 are as follows:

Amortizable debt issuance costs
Accumulated amortization
Net debt issuance costs

2022

2021

$

$

12,813
(7,781)
5,032

$

$

8,751
(6,801)
1,950

Amortization of debt issuance costs totaling $1.3 million, $0.6 million, and $0.7 million was recorded for each of the years

ended December 31, 2022, 2021, and 2020, respectively, and was included as part of interest expense.

F-19

NOTE 11 – REVENUE RECOGNITION

Disaggregation of Revenue

The Company disaggregates revenue from clients, most of which is earned over time, into categories that depict how the nature,
amount and uncertainty of revenue and cash flows are affected by economic and business factors. Those categories are client market,
client type, and contract mix. Client markets provide insight into the breadth of the Company’s expertise. In classifying revenue by
client market, the Company attributes revenue from a client to the market that the Company believes is the client’s primary market.
The Company also classifies revenue by the type of client for which it does business, which is an indicator of the diversity of its client
base. The Company attributes revenue generated as a subcontractor to the market or type of the ultimate client. Disaggregation by
contract mix provides insight in terms of the degree of performance risk that the Company has assumed. Fixed-price contracts are
considered to provide the highest amount of performance risk as the Company is required to deliver a scope of work or level of effort
for a negotiated fixed price. Time-and-materials contracts require the Company to provide skilled employees on contracts for
negotiated fixed hourly rates. Since the Company is not required to deliver a scope of work, but merely skilled employees, it considers
these contracts to be less risky than a fixed-price agreement. Cost-based contracts are considered to provide the lowest amount of
performance risk since the Company is generally reimbursed for all contract costs incurred in performance of contract deliverables
with only the amount of incentive or award fees (if applicable) dependent on the achievement of negotiated performance requirements.

Client Markets:
Energy, environment, and infrastructure
Health, education, and social programs
Safety and security
Consumer and financial
Total

Client Type:
U.S. federal government
U.S. state and local government
International government
Government
Commercial
Total

Contract Mix:
Time-and-materials
Fixed-price
Cost-based
Total

Contract Balances:

2022

Year ended December 31,
2021

2020

664,996
906,081
129,357
79,530
1,779,964

$

$

653,080
677,736
115,659
106,573
1,553,048

2022

Year ended December 31,
2021

980,406
260,562
102,808
1,343,776
436,188
1,779,964

$

$

735,104
235,353
139,237
1,109,694
443,354
1,553,048

2022

Year ended December 31,
2021

713,581
802,804
263,579
1,779,964

$

$

633,152
645,761
274,135
1,553,048

$

$

$

$

$

$

609,358
677,454
120,599
99,464
1,506,875

2020

666,968
219,507
93,581
980,056
526,819
1,506,875

2020

732,365
536,903
237,607
1,506,875

$

$

$

$

$

$

Contract assets consist primarily of unbilled amounts resulting from long-term contracts when revenue recognized exceeds the

amount billed often due to billing schedule timing. Contract liabilities result from advance payments received on a contract or from
billings in excess of revenue recognized on long-term contracts due to billing schedule timing.

The following table summarizes the contract balances as of December 31, 2022 and December 31, 2021:

Contract assets
Contract liabilities
Net contract assets (liabilities)

December 31, 2022

$

$

169,088
(25,773)
143,315

December 31, 2021
137,867
$
(39,665)
98,202

$

$

$

Change

31,221
13,892
45,113

F-20

The net contract assets (liabilities) as of December 31, 2022 increased by $45.1 million as compared to December 31, 2021,

primarily due to the timing difference between the performance of services and billings to and payments from customers. There were
no material changes to contract balances due to impairments or credit losses during the period. During the years ended December 31,
2022 and 2021, the Company recognized $27.4 million and $22.7 million in revenue related to the contract liabilities balance at
December 31, 2021 and 2020, respectively.

Performance Obligations:

The Company had $1.5 billion in unfulfilled performance obligations as of December 31, 2022, which primarily reflects the

future delivery of services for which revenue will be recognized over time. The unperformed obligations relate to continued or
additional services required on contracts, including those that are either non-cancellable or those that are cancellable but the Company
has determined to have substantive termination penalties, and were generally valued using an estimated cost-plus margin approach,
with variable consideration being estimated at the most likely amount. The amounts exclude marketing offers, which are negotiated
but unexercised contract options and indefinite delivery/indefinite quantity (IDIQ) and similar arrangements that provided a
framework for customers to issue specific tasks, delivery, or purchase orders in the future. The Company expects to satisfy these
performance obligations in approximately two years.

NOTE 12 - DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company uses interest rate swap arrangements (the “Swaps”) to manage or hedge its variable interest rate risk under the

Credit Facility. Notwithstanding the terms of the Swaps, the Company is ultimately obligated for all amounts due and payable under
the Credit Facility. The Company does not use such instruments for speculative or trading purposes.

The Company designated the Swaps as cash flow hedges. Derivative instruments are recorded on the consolidated balance sheets

at fair value. Unrealized gains and losses on derivatives designated as cash flow hedges are reported in other comprehensive income
(loss) (“AOCI”) and reclassified to earnings in a manner that matches the timing of the earnings impact of the hedged transactions.
Management intends that the Swaps remain effective and, on a quarterly basis, evaluates them to determine their effectiveness or
ineffectiveness and records the change in fair value as an adjustment to other comprehensive income or loss.

A summary of Swaps designated as cash flow hedges as of December 31, 2022 are as follows:

Date of Interest Rate Swap Agreement
September 30, 2016 (1)
August 31, 2017 (2)
August 8, 2018 (3)
August 8, 2018
February 20, 2020 (4)

Notional Amount
($million)
$100.0
$25.0
$50.0
$25.0
$100.0

Paid Fixed
Interest Rate%
-
1.795%
2.736%
2.851%
1.191%

Dates of Effected Cash Flows

Ending
Beginning
January 31, 2023
January 31, 2018
August 31, 2023
August 31, 2018
August 31, 2023
August 31, 2018
August 31, 2018
August 31, 2023
February 28, 2020 February 28, 2025

(1)

(2)

(3)

(4)

On December 1, 2016, the Company sold the interest rate hedge agreement. The fair value of the interest rate hedge, as of the date of the sale, was recorded in other comprehensive
income, net of tax. The gain from the sale will be recognized into earnings when earnings are impacted by the cash flows of the previously hedged variable interest rate.
On September 15, 2022, the Company amended the interest rate hedge agreement to change the benchmark from LIBOR with a fixed interest rate of 1.8475% to a term SOFR fixed
interest rate of 1.795%.
On August 25, 2022, the Company amended the interest rate hedge agreement to change the benchmark from LIBOR with a fixed interest rate of 2.854% to a term SOFR fixed interest
rate of 2.736%.
On August 25, 2022, the Company amended the interest rate hedge agreement to change the benchmark from LIBOR with a fixed interest rate of 1.294% to a term SOFR fixed interest
rate of 1.191%.

For the years ended December 31, 2022 and 2021, the effect of the Swaps on the Company’s financial statements are as follows:

Cash Flow Hedging Derivatives

Total Gain Recorded to
AOCI

2022

2021

Amount of (Gain) or Loss
Reclassified from AOCI into
Income

2022

2021

Interest Rate Swaps

$

11,445

$

3,285

$

(248) $

3,008

As of December 31, 2022, the net amount of realized losses from the hedge agreements expected to be reclassified from AOCI

into earnings within the next 12 months is $5.1 million.

F-21

$

$

$

$

68,817
5,856
74,673

2020

14,645
5,198
1,736
21,579

(1,721)
314
(458)
(1,865)
19,714

NOTE 13 - INCOME TAXES

The domestic and foreign components of income before provision for income taxes are as follows for the years ended December

31:

Domestic
Foreign
Income before income taxes

2022

2021

2020

$

$

80,372
3,608
83,980

$

$

97,884
2,206
100,090

Income tax expense consisted of the following for the years ended December 31:

Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Income tax expense

2022

2021

8,413
2,686
1,661
12,760

4,264
3,607
(894)
6,977
19,737

$

$

15,961
3,494
687
20,142

4,724
4,395
(303)
8,816
28,958

$

$

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities

for financial reporting purposes and income tax purposes.

Deferred tax assets (liabilities) consisted of the following at December 31:

2022

2021

Deferred Tax Assets
Allowance for expected credit losses
Accrued paid time off
Foreign net operating loss (NOL) carryforward
State net operating loss (NOL) carryforward
Stock option compensation
Deferred rent
Deferred compensation
Foreign tax credits
State tax credits
Foreign exchange
Foreign deferred
Accrued bonus
Impairment
Accrued liabilities and other

Less: Valuation Allowance
Total Deferred Tax Assets

Deferred Tax Liabilities
Retention
Prepaid expenses
Payroll taxes
Unbilled revenue
Depreciation
Amortization
Deferred gain and other
Total Deferred Tax Liabilities
Total Net Deferred Tax Liability

$

$

1,404
2,801
229
502
1,586
4,224
4,692
7,236
384
4,532
875
5,696
2,650
6,513
43,324
(7,607)
35,717

(407)
(366)
(697)
(409)
(270)
(99,045)
(2,561)
(103,755)
(68,038)

$

$

1,825
2,504
91
522
1,680
2,566
5,358
6,677
1,081
4,014
727
5,303
—
6,660
39,008
(7,048)
31,960

(637)
(726)
(544)
(607)
(1,920)
(68,194)
(1,245)
(73,873)
(41,913)

F-22

The Company measures certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the

future, which is 26.8%.

As of December 31, 2022, the cumulative foreign tax credit carryforward balance increased by approximately $0.6 million and
the valuation allowance required increased by approximately $0.6 million. No additional income taxes have been provided for on any
remaining undistributed foreign earnings not subject to the transition tax. No additional deferred income taxes have been provided for
the $8.9 million of additional unfavorable outside basis differences inherent in these foreign entities as of December 31, 2022 because
these amounts continue to be permanently reinvested in foreign operations.

As of December 31, 2022, the Company had approximately $0.7 million of foreign operating loss carryforward for income taxes

which may be carried forward indefinitely.

As of December 31, 2022, the Company has NOL carryforwards for state income tax purposes of approximately $6.8 million,

which expire in 2034. The Company acquired these NOLs as a result of its purchase of a business in November 2014. Internal
Revenue Code Section 382 imposes an annual limitation on the use of a corporation’s NOLs, tax credits and other carryovers after an
“ownership change” occurs. Section 382 imposes an annual limitation on the amount of post-ownership change taxable income a
corporation may offset with pre-ownership change NOLs and credits. In general, the annual limitation is determined by multiplying
the value of the corporation’s stock immediately before the ownership change (subject to certain adjustments) by the applicable long-
term tax-exempt rate. Any unused portion of the annual limitation is available for use in future years until such NOLs are scheduled to
expire (in general, NOLs may be carried forward 20 years). The Company established a valuation allowance of approximately $0.4
million against the portion of the deferred tax asset which it is more-likely-than-not that it will not be recoverable (e.g. expiration of
the statute of limitations, etc.)

As of December 31, 2022, the Company had gross state income tax credit carryforwards of approximately $0.4 million, which
expire between 2024 and 2034. A deferred tax asset of approximately $0.4 million, net of federal benefit, has been established related
to these state income tax credit carryforwards as of December 31, 2022.

The need to establish valuation allowances for deferred assets is based on a more-likely-than-not threshold that the benefit of

such assets will be realized in future periods. Appropriate consideration has been given to all available evidence, including historical
operating results, projections of taxable income, and tax planning alternatives. The Company concluded that a valuation allowance of
$0.4 million was required for tax attributes related to specified state jurisdictions and an additional $7.2 million valuation allowance is
required against our U.S. foreign tax credit carryforwards.

The total amount of unrecognized tax benefits as of December 31, 2022 and 2021 was $0.1 million and $0.5 million,

respectively, which includes $0.1 million and $0.5 million, respectively, of tax positions that, if recognized, would impact the
effective rate.

The unrecognized tax benefit reconciliation, excluding penalty and interest, is as follows:

Unrecognized tax benefits at January 1, 2020
Increase attributable to tax positions taken during a prior period
Unrecognized tax benefits at December 31, 2020
Decrease attributable to tax positions taken during the current period
Unrecognized tax benefits at December 31, 2021
Decrease attributable to tax positions taken during the current period
Unrecognized tax benefits at December 31, 2022

$

$

—
811
811
(361)
450
(305)
145

The Company’s 2019 to 2021 tax years remain subject to examination by the Internal Revenue Service for federal tax purposes.

Certain significant state and foreign tax jurisdictions are also either currently under examination or remain open under the statutes of
limitation and subject to examination for the tax years from 2019 to 2021.

Although the Company believes it has adequately provided for all uncertain tax positions, amounts asserted by taxing authorities

could be greater than the Company’s accrued position. Accordingly, additional provisions on federal, state and foreign income tax
related matters could be recorded in the future as revised estimates are made or the underlying matters are effectively settled or
otherwise resolved. Conversely, the Company could settle positions with the tax authorities for amounts lower than have been
accrued. The Company believes it is reasonably possible that, during the next 12 months, the Company’s liability for uncertain tax
positions may not change.

F-23

The Company’s provision for income taxes differs from the federal statutory rate. The differences between the statutory rate and

the Company’s provision are as follows:

Taxes at statutory rate
State taxes, net of federal benefit
Foreign tax rate differential
Executive compensation
Other permanent differences
Prior year tax adjustments
Deferred Impact of State Rate Change
Worthless stock deduction
Unrecognized tax benefits
Valuation allowance
Equity-based compensation
Tax credits
Taxes at effective rate

2022

2021

2020

21.0%
5.8%
0.1%
2.2%
2.0%
(1.1)%
0.6%
(4.6)%
(0.4)%
0.7%
(1.3)%
(1.5)%
23.5%

21.0%
5.6%
0.1%
2.1%
(0.4)%
1.5%
—
—
(0.5)%
1.3%
(1.0)%
(0.8)%
28.9%

21.0%
5.6%
0.3%
2.4%
0.1%
(1.1)%
—
—
1.0%
1.6%
(3.8)%
(0.7)%
26.4%

NOTE 14 - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Accumulated other comprehensive loss included the following:

Accumulated other comprehensive (loss) income at
January 1, 2020
Current period other comprehensive income (loss):
Other comprehensive income (loss) before
reclassifications
Amounts reclassified from accumulated other
comprehensive (loss) income
Effect of taxes (3)
Total current period other comprehensive income
(loss)

Accumulated other comprehensive (loss) income at
December 31, 2020
Current period other comprehensive (loss) income:
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from accumulated other
comprehensive (loss) income
Effect of taxes (3)
Total current period other comprehensive (loss)
income

Accumulated other comprehensive (loss) income at
December 31, 2021
Current period other comprehensive (loss) income:
Other comprehensive (loss) income before
reclassifications
Amounts reclassified from accumulated other
comprehensive (loss) income (4)
Effect of taxes (3)
Total current period other comprehensive (loss)
income

Accumulated other comprehensive (loss) income at
December 31, 2022

Foreign
Currency
Translation
Adjustments

Gain on Sale of
Interest Rate
Hedge
Agreement (1)

Changes in
Fair Value
of Interest
Rate Hedge
Agreements (2)(5)

Total

$

(10,995) $

1,634

$

(2,783) $

(12,144)

4,141

—
(356)

3,785

—

(720)
182

(538)

(9,867)

(5,726)

2,751
1,907

2,031
1,733

(5,209)

(1,962)

(7,210)

1,096

(7,992)

(14,106)

(1,676)

—
127

(1,549)

(8,759)

(9,259)

—
3,962

(5,297)

—

(720)
193

(527)

569

—

(720)
192

(528)

3,285

1,609

3,728
(1,866)

3,008
(1,546)

5,147

3,071

(2,845)

(11,035)

11,445

2,186

472
(3,190)

(248)
964

8,727

2,902

$

(14,056) $

41

$

5,882

$

(8,133)

F-24

(1)

(2)

(3)

(4)

Represents the fair value of an interest rate hedge agreement, designated as a cash flow hedge, which was sold on December 1, 2016. The fair value of the interest rate hedge
agreement was recorded in other comprehensive income, net of tax, and will be reclassified to earnings when earnings are impacted by the hedged items, as interest payments are made
on the Credit Facility from January 31, 2018 to January 31, 2023.

Represents the change in fair value of interest rate hedge agreements designated as a cash flow hedges. The fair value of the interest rate hedge agreements was recorded in other
comprehensive income, net of tax, and will be reclassified to earnings when earnings are impacted by the hedged items, as interest payments are made on the Credit Facility from
August 31, 2018 to February 28, 2025. See additional details of the hedge agreements in Note 12 - Derivative Instruments and Hedging Activities.

The Company’s effective tax rate for the years ended December 31, 2022, 2021, and 2020 was 23.5%, 28.9%, and 26.4%, respectively.

The Company expects to reclassify $0.1 million related to the Gain on Sale of Interest Rate Hedge Agreement, and $5.1 million in unrealized gains related to the Change in Fair Value
of Interest Rate Hedge Agreement from accumulated other comprehensive loss into earnings during the next 12 months.

(5)

The fair value of the interest rate hedge agreements is included in other current and other long-term liabilities on the consolidated balance sheets.

NOTE 15 - ACCOUNTING FOR STOCK-BASED COMPENSATION

Stock Incentive Plans

On April 4, 2018, the Company’s board of directors approved the 2018 Omnibus Incentive Plan (the “2018 Omnibus Plan”),

which was subsequently approved by the stockholders and became effective on May 31, 2018 (the “Effective Date”). The 2018
Omnibus Plan replaced the previous 2010 Omnibus Incentive Plan (the “Prior Plan”). The 2018 Omnibus Plan was amended on May
28, 2020 to increase the number of shares available for issuance.

The 2018 Omnibus Plan, as amended, allows the Company to grant up to 1,600,000 shares using stock options, stock

appreciation rights, restricted stock, RSUs, performance units and PSAs, cash-based awards, and other stock-based awards to all key
officers, key employees, and non-employee directors of the Company. Outstanding shares granted under the Prior Plan, totaling
10,885, as of December 31, 2022, remain subject to its terms and conditions, and additional awards from the Prior Plan are prohibited
after the Effective Date. As of December 31, 2022, the Company had approximately 775,252 shares available for grant under the
2018 Omnibus Plan. CSRSUs have no impact on the shares available for grant under the Omnibus Plan, nor on the calculated shares
used in earnings per share (“EPS”) calculations.

Stock-based compensation expense is included as part of direct costs and indirect and selling expenses on the consolidated
statements of comprehensive income. The total stock-based compensation expense for the years ended December 31, 2022, 2021, and
2020, the unrecognized compensation expense at December 31, 2022, and the weighted-average period to recognize the remaining
unrecognized shares are as follows:

Stock-Based Compensation Expense

Recognized
as of December 31,

Unrecognized
as of December 31,

Restricted Stock Units
Cash-Settled Restricted Stock Units
Non-Employee Director Awards
Performance Shares
Total

2022

2021

$

$

9,300
5,709
1,087
2,784
18,880

$

$

8,563
8,251
937
3,731
21,482

2020
11,895
7,015
755
4,905
24,570

$

$

$

$

2022

14,610
9,532
460
3,007
27,609

Weighted
Average
Period to
Recognize
(years)

1.9
1.7
0.4
1.5

F-25

The assumptions of employment termination forfeiture rates used in the determination of fair value of stock awards during the

2022 calendar year were based on the Company’s historical average of actual forfeitures from the previous 10 years preceding the
reporting period. The expected annualized forfeiture rates used during the 2022 calendar year varied from 0% to 19.61%, and the
Company does not expect these termination rates to vary significantly in the future.

Stock Options

Option awards are granted with an exercise price equal to the market value of the Company’s common stock on the date of

grant. There were no option awards granted during 2022, 2021, and 2020.

The following table summarizes the changes in outstanding stock options:

Outstanding at January 1, 2020
Exercised
Granted
Forfeited/Expired
Outstanding at December 31, 2020
Exercised
Granted
Forfeited/Expired
Outstanding at December 31, 2021
Exercised
Granted
Forfeited/Expired
Outstanding at December 31, 2022
Vested plus expected to vest at December 31, 2022
Exercisable at December 31, 2022

Number of
Shares

Weighted
Average
Exercise Price

Aggregate
Intrinsic
Value

108,128
$
(69,901) $
— $
— $
38,227
$
(8,535) $
— $
— $
29,692
$
(18,807) $
— $
— $
$
$
$

10,885
10,885
10,885

35.82
37.94
—
—
31.93
27.17
—
—
33.30
32.04
—
—
35.49
35.49
35.49

$
$
$

691,841
691,841
691,841

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $99.05 as of December 31,
2022. The total intrinsic value of options exercised was $1.9 million, $0.8 million, and $5.1 million for the years ended December 31,
2022, 2021, and 2020, respectively. All options have vested as of December 31, 2022, and the weighted-average remaining contractual
term for options vested was 0.8 years and for exercisable options was 0.8 years.

Information regarding stock options outstanding as of December 31, 2022 is summarized below:

OPTIONS OUTSTANDING

OPTIONS EXERCISABLE

Number
Outstanding
As of
December 31, 2022
4,138
6,747
10,885

Weighted
Average
Remaining
Contractual
Term

Weighted
Average
Exercise
Price

0.2 $
1.2 $
0.8 $

27.03
40.68
35.49

Number
Exercisable
As of
December 31, 2022
4,138
6,747
10,885

Weighted
Average
Exercise
Price

$
$
$

27.03
40.68
35.49

Range of
Exercise Prices
$27.03 to $27.03
$40.68 to $40.68
$27.03 to $40.68

Restricted Stock Units

RSUs generally have a vesting term of three years. On vesting the employee is issued one share of stock for each RSU awarded.

The fair value of shares vested was $10.8 million, $7.9 million, and $14.1 million for the years ended December 31, 2022, 2021, and
2020, respectively.

F-26

A summary of the Company’s RSUs is presented below.

Non-vested RSUs at January 1, 2020
Granted
Vested
Cancelled
Non-vested RSUs at December 31, 2020
Granted
Vested
Cancelled
Non-vested RSUs at December 31, 2021
Granted
Vested
Cancelled
Non-vested RSUs at December 31, 2022
RSUs expected to vest in the future

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Aggregate
Intrinsic
Value

$
449,975
$
170,411
(258,307) $
(56,680) $
$
305,399
$
132,757
(119,203) $
(15,117) $
$
303,836
$
148,361
(140,666) $
(26,705) $
$
284,826
$
250,604

62.48
58.27
54.73
63.46
66.51
95.68
66.46
68.53
79.17
93.70
76.53
77.16
88.23
87.50

$
$

28,212,015
24,822,356

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $99.05 per share as of

December 31, 2022.

Cash-Settled Restricted Stock Units

CSRSUs generally have a vesting term of three years. The fair value of CSRSUs vested and settled in cash for the years ended

December 31, 2022, 2021, and 2020 was $6.6 million, $8.7 million and $9.3 million, respectively. A summary of the Company’s
CSRSUs is presented below.

Non-vested CSRSUs at January 1, 2020
Granted
Vested
Cancelled
Non-vested CSRSUs at December 31, 2020
Granted
Vested
Cancelled
Non-vested CSRSUs at December 31, 2021
Granted
Vested
Cancelled
Non-vested CSRSUs at December 31, 2022
CSRSUs expected to vest in the future

Number of
Shares

Weighted-
Average
Grant Date
Fair Value

Aggregate
Intrinsic
Value

$
296,233
134,259
$
(154,653) $
(34,358) $
$
241,481
52,246
$
(104,272) $
(23,195) $
$
166,260
115,024
$
(75,566) $
(17,299) $
$
188,419
$
161,193

58.83
60.30
49.44
63.03
65.06
89.51
63.96
69.68
72.79
97.88
73.20
80.02
87.28
85.88

$
$

18,662,902
15,966,125

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $99.05 per share as of

December 31, 2022.

F-27

Non-Employee Director Awards

Beginning on July 2, 2018, the Company granted awards of registered shares to its non-employee directors on an annual basis

under the Omnibus Plan. A summary of the non-employee director awards is presented below:

Non-vested RSUs at January 1, 2020

Granted
Vested
Cancelled

Non-vested RSUs at December 31, 2020

Granted
Vested
Cancelled

Non-vested RSUs at December 31, 2021

Granted
Vested
Cancelled

Non-vested RSUs at December 31, 2022
RSUs expected to vest in the future

Number of
Shares

Weighted-
Average Grant
Date Fair
Value

Aggregate
Intrinsic
Value

$
4,860
12,541
$
(10,891) $
— $
$
6,510
11,186
$
(12,110) $
— $
$
5,586
11,399
$
(11,637) $
— $
$
$

5,348
5,348

73.94
64.58
68.82
—
64.47
90.73
76.61
—
90.73
95.35
93.39
—
94.79
94.79

$
$

529,719
529,719

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $99.05 per share as of

December 31, 2022.

Performance Share Awards

In 2015, the Company’s Board of Directors approved a performance-based share program (the “Program”) that provides for the

issuance of PSAs to its senior management. Under the Program, the number of PSAs that the participant will receive depends on the
Company’s achievement of two performance goals during two performance periods. The performance goals under the Program are
based on (i) the Company’s compounded annual growth rate in EPS during a two-year performance period (the “Initial Period”) and
(ii) the Company’s cumulative total shareholder return relative to its peer group (“rTSR”) during a performance period from the first
day of the performance period (typically January 1 of the year awarded) to the last day of the third year of the performance period
(typically December 31). The PSAs will only be eligible to vest following the expiration of the three-year performance period. The
actual shares vested will be subject to both continued employment by the Company (barring certain exceptions allowing for partial
performance periods) and actual financial measures achieved. The final number of shares of common stock that will be issued to each
participant at the end of the applicable performance period will be determined by multiplying the award by the product of two
percentages: the first based on the Company’s EPS performance and the second based on the Company’s rTSR performance, subject
to a minimum and maximum performance level. As of December 31, 2022, shares granted during 2020, 2021, and 2022 are within
year three, two, and one of the performance periods, respectively, and therefore have not fully vested. A total of 47,634 shares granted
in 2019 vested during 2022 after meeting the performance goals. As of December 31, 2022, a total of 66,805 shares granted in 2020
and 2021 are expected to vest in the future based on estimated financial measures achieved in the Initial Period and rTSR
performance.

F-28

A summary of the Company’s PSAs is presented below.

Non-vested PSAs at January 1, 2020

Granted
Vested
Cancelled

Non-vested PSAs at December 31, 2020

Granted
Vested
Cancelled

Non-vested PSAs at December 31, 2021

Granted
Vested
Cancelled

Non-vested PSAs at December 31, 2022
PSAs expected to vest in the future

Number of
Shares

Weighted-
Average Grant
Date Fair Value
60.67
$
148,414
51.44
87,314
$
38.81
(88,038) $
69.66
(5,569) $
68.19
$
142,121
85.03
54,216
$
65.05
(63,258) $
—
— $
76.54
$
133,079
93.15
38,412
$
82.38
(47,634) $
80.64
(3,170) $
79.42
$
94.83
$

120,687
66,805

Aggregate
Intrinsic
Value

$
$

11,954,047
6,617,006

The aggregate intrinsic value in the preceding table is based on the Company’s closing stock price of $99.05 per share as of
December 31, 2022. The fair value of the awards is estimated on the grant date using a Monte Carlo simulation model due to the
market condition for the rTSR component. The fair value assumptions using the Monte Carlo simulation model for awards granted in
2022, 2021, and 2020 were:

Dividend Yield
Historical Volatility
Risk-Free Rate of Returns

NOTE 16 – BUSINESS COMBINATIONS

Blanton & Associates

2022

2021

2020

0.6%
39.0%
2.1%

0.6%
40.9%
0.3%

1.0%
35.7%
0.4%

On September 1, 2022, the Company completed the acquisition of Blanton & Associates (“Blanton”), an environmental
consulting, planning, and project management firm headquartered in Austin, Texas. Blanton brings proven domain expertise in
environmental regulatory compliance and permitting for the transportation, renewable energy, water, and resource management
sectors and adds technically strong and specialized staff in all aspects of environmental services to the Company. The Company
recorded net working capital of $4.6 million and property and equipment of $0.2 million at their fair value at the acquisition date
except for contract assets and contract liabilities which were measured in accordance with ASC 606, Revenue Recognition, deferred
income tax liabilities of $3.0 million, and also allocated $9.7 million to goodwill and $11.4 million to intangible assets. Intangible
assets consisted of $10.9 million related to existing customer relationships, $0.5 million related to contract backlog, and $0.1 million
related to trade names and trademarks. The acquisition of Blanton is not material to the Company’s results of operations.

SemanticBits, LLC

On July 13, 2022, the Company completed the acquisition of SemanticBits, LLC (“SemanticBits”), a 450-person Virginia
limited liability company. SemanticBits is a premier partner to U.S. federal health agencies for mission-critical digital modernization
solutions and provides a full suite of scalable digital modernization services using open-source frameworks, including end-to-end agile
scale development capabilities, cloud-native solutions, data analytics and human-centered designs. The acquisition provides synergies
and scalabilities to support federal agencies with advanced IT solutions, digital modernization, and health expertise to solve complex
customer challenges. As a result of the acquisition, SemanticBits became a wholly owned subsidiary of the Company.

The acquisition was accounted for as a business combination under ASC 805, Business Combination. The preliminary purchase
price was $220.0 million in cash, subject to post-closing working capital adjustments, and was funded by the existing Credit Facility.
The purchase price was initially allocated to the tangible and intangible assets acquired and liabilities assumed based on the fair value
on the acquisition date, with the exception of contract assets and contract liabilities which were measured in accordance with ASC
606, Revenue Recognition. The Company also engaged an independent valuation firm to assist management in the allocation of the
purchase price to goodwill and other acquired intangible assets.

The purchase price allocation is summarized as follows:

F-29

Contract receivables
Contract assets
Customer-related intangibles
Trade names and trademarks
Other current and non-current assets
Accrued salaries and benefits
Accrued expenses and other liabilities
Deferred tax liability
Net assets acquired
Goodwill
Purchase consideration

$

$

12,699
6,071
62,967
1,120
407
(3,998)
(6,244)
(16,701)
56,321
159,677
215,998

The Company allocated $63.0 million related to existing customer relationships and $1.1 million related to trade names and

trademarks intangible assets, respectively, and $159.7 million to goodwill. Goodwill is reflective of the existing workforce of
SemanticBits and the expected synergies created with the Company as part of the acquisition. The amortization periods for the amount
allocated to customer-related intangible asset and trade names and trademarks are 4.0 years and 0.7 years from the acquisition date,
respectively. The goodwill and intangible assets are not deductible for income tax purposes.

Acquisition-related costs and integration costs totaled $4.3 million and are included as part of indirect and selling expenses in

the Company’s consolidated statements of comprehensive income.

The results of SemanticBits’ operations have been included in the Company’s consolidated financial statements from the date of

its acquisition. For the year ended December 31, 2022, SemanticBits contributed revenues of $64.3 million and gross profit of $26.7
million. Computation of an earnings measure other than gross profit is impracticable due to SemanticBits’ operations and financial
systems being integrated with those of the Company.

The following unaudited condensed pro forma information presents combined financial information as if the acquisition of
SemanticBits had been effective at January 1, 2021, the beginning of the 2021 fiscal year. As a result, fiscal year 2022 represents the
pro forma results for year two of the acquisition. The pro forma information includes alignment of SemanticBits’ revenue recognition
policy, corrections of employee-related expenses, and adjustments reflecting changes in the amortization of intangibles, acquisition-
related costs, interest expense, and records income tax effects as if SemanticBits had been included in the Company’s results of
operations. The pro forma information is not intended to reflect the actual combined results of operations that would have occurred if
the acquisition was completed on January 1, 2021, nor is it indicative of future operating results after the acquisition date of July 13,
2022.

(in thousands)
Revenue
Net income

Creative Systems and Consulting

(Unaudited)
Year Ended

$

2022

1,856,399
75,999

$

2021

1,667,425
63,752

On December 31, 2021, the Company acquired Creative Systems, a premier provider of IT modernization and digital
transformation solutions to federal agencies, for a cash purchase price of approximately $159.5 million, subject to working capital
adjustments of $2.9 million, for a final purchase price of $156.6 million. The Company recognized fair value of the assets acquired
and liabilities assumed and allocated $128.1 million to goodwill and $28.9 million to intangible assets. Intangible assets consisted of
$24.5 million in customer relationships, $3.7 million related to developed technology, $0.6 million related to trade names and
trademarks, and $0.1 million related to non-compete agreements. The customer-related and technology related intangibles are being
amortized straight-line over 4 years and 10 years, respectively, from the date of acquisition, while trade names and trademarks and
non-compete agreements will be amortized in less than one year from the acquisition date. Goodwill is reflective of the existing
workforce at Creative Systems and the expected synergies created with the Company as a result of the acquisition. The pro-forma
impact of the acquisition is not material to the Company’s results of operations.

ESAC

On November 1, 2021, the Company completed the acquisition of ESAC, one of the leading specialized providers of advanced
health analytics, research data management and bioinformatics solutions to U.S. federal health agencies, for a cash purchase price of
approximately $17.3 million, subject to working capital adjustments. In addition to working capital acquired of $2.6 million, the
Company recognized fair value of the assets acquired and liabilities assumed and allocated of $11.3 million to goodwill and $3.4
million to intangible assets. Intangible assets included $3.1 million related to customer relationships and $0.3 million related to
technology and other intangibles, and are amortized over 3 years and less than 1 year, respectively. The pro-forma impact of the
acquisition is not material to the Company’s results of operations.

F-30

NOTE 17 - EARNINGS PER SHARE

The Company’s EPS is computed by dividing reported net income by the weighted-average number of shares outstanding.

Diluted EPS considers the potential dilution that could occur if common stock equivalents of stock options, RSUs, and PSAs were
exercised or converted into stock. PSAs are included in the computation of diluted shares only to the extent that the underlying
performance conditions: (i) are satisfied as of the end of the reporting period or (ii) would be considered satisfied if the end of the
reporting period were the end of the related performance period and the result would be dilutive under the treasury stock method.

As of December 31, 2022, the PSAs granted during the year ended December 31, 2020 and 2021 met the related performance
conditions for the initial performance period and were included in the calculation of diluted EPS. However, the PSAs granted during
the year ended December 31, 2022 have not yet completed their initial two-year performance period and therefore were excluded in
the calculation of diluted EPS.

For the years ended December 31, 2022, 2021, and 2020, there were immaterial RSU shares that were excluded from the

calculation of EPS because they were anti-dilutive.

The dilutive effect of stock options, RSUs, and performance shares for each period reported is summarized below:

Net Income

2022

2021

2020

$

64,243

$

71,132

$

54,959

Weighted-average number of basic shares outstanding during the period
Dilutive effect of stock options, RSUs, and performance shares
Weighted-average number of diluted shares outstanding during the period

18,818
215
19,033

18,868
256
19,124

Basic earnings per share
Diluted earnings per share

$

$

3.41

3.38

$

$

3.77

3.72

$

$

18,841
294
19,135

2.92

2.87

NOTE 18 - SHARE REPURCHASE PROGRAM

In September 2017, the board approved a share repurchase program that allows for share repurchases in the aggregate up to

$100.0 million under approved share repurchase plans pursuant to Rules 10b5-1 and 10b-18 under the Exchange Act. In November
2021, the board amended and increased the limit under the previous authorization of $100.0 million to $200.0 million. The Restated
Credit Agreement permits share repurchases provided the Company’s Consolidated Leverage Ratio, prior to and after giving effect to
such repurchases, is 0.50 to 1.00 less than the then-applicable maximum Consolidated Leverage Ratio and subject to a net liquidity of
$100.0 million. Notwithstanding the formula-based limit, the Company is permitted to make share repurchases up to $25.0 million per
calendar year provided that it was not in default.

Purchases under this program may be made from time to time at prevailing market prices in open market purchases or in
privately negotiated transactions pursuant to Rule 10b-18 under the Exchange Act and in accordance with applicable insider trading
and other securities laws and regulations. The purchases are funded from existing cash balances and/or borrowings, and the
repurchased shares are held in treasury. The timing and extent to which the Company repurchases its shares will depend on market
conditions and other corporate considerations in the Company’s sole discretion.

For the year ended December 31, 2022, the Company repurchased a combined 176,375 shares at an average price of $96.18 per
share or a total cost of $17.0 million under this program. As of December 31, 2022, approximately $111.9 million remained available
under the share repurchase plan.

NOTE 19 - FAIR VALUE

The Company measures and reports certain financial assets and liabilities at fair value in accordance with ASC 820, Fair Value
Measurements and Disclosures. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants on the measurement date. Generally, fair value is based on observable quoted
market prices or derived from observable market data when such market prices or data are available. ASC 820 establishes a three-level
hierarchy used to estimate fair value by which each level is categorized based on the priority of the inputs used to measure fair value:

•

•

Level 1: Quoted prices that are available in active markets for identical assets or liabilities;

Level 2: Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or
liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g.
interest rates and yield curves that are observable at commonly quoted intervals, and implied volatilities); and inputs
derived principally from or corroborated by observable market data by correlation or other means; and

F-31

•

Level 3: Uses inputs that are unobservable and require the Company to make certain assumptions and require significant
estimation and judgment from management to use in pricing the fair value of the assets and liabilities.

Certain financial instruments, including cash and cash equivalents, contract receivables, and accounts payable are carried at cost,

which, due to their short maturities, approximates their fair values at December 31, 2022 and 2021. The carrying value of other long-
term liabilities related to capital expenditure obligations approximates their fair value at December 31, 2022 and 2021 based on the
current rates offered to the Company for similar instruments with comparable maturities (Level 2). The Company believes the
carrying value of its Credit Facility at December 31, 2022 and 2021 approximates the estimated fair value for debt with similar terms,
interest rates, and remaining maturities currently available to companies with similar credit ratings (Level 2).

The Company applies the provisions of ASC 820 to its assets and liabilities that are required to be measured at fair value

pursuant to other accounting standards, including assets and liabilities resulting from the Company’s nonqualified deferred
compensation plan, interest rate swap agreement (see Note 12 – Derivative Instruments and Hedging Activities), and foreign currency
forward contract agreements not eligible for hedge accounting.

Financial instruments measured at fair value on a recurring basis and their location within the accompanying consolidated

financial statements are as follows:

(in thousands)
Assets:
Interest rate swaps - current portion
Interest rate swaps - long-term portion
Deferred compensation investments in cash
surrender life insurance
Total

Liabilities:
Deferred compensation plan liabilities

(in thousands)
Assets:
Forward contract agreements
Deferred compensation investments in cash
surrender life insurance
Total

December 31, 2022

Level
1

Level 2

Level
3

Total

Location on Balance Sheet

$ — $ 5,051
2,950

—

$ — $ 5,051
2,950

—

Prepaid expenses and other assets
Other assets

— 17,869
$ — $25,870

— 17,869
$ — $25,870

Other assets

$ — $17,485

$ — $17,485

Other long-term liabilities

December 31, 2021

Level
1

Level 2

Level 3

Total

Location on Balance Sheet

$ — $

267

$

— $

267

Prepaid expenses and other

—

20,159
$ — $ 20,426

$

—
— $

20,159
20,426

Other assets

Liabilities:
Deferred compensation plan liabilities

$ — $ 20,129

$

— $

20,129

Interest rate swaps - current portion
Interest rate swaps - long-term portion
Total

—
—

3,026
888
$ — $ 24,043

$

—
—
— $

3,026
888
24,043

Other long-term liabilities
Accrued expenses and other current
liabilities
Other long-term liabilities

NOTE 20 - COMMITMENTS AND CONTINGENCIES

Letters of Credit and Guarantees

At December 31, 2022 and 2021, the Company was contingently liable under open standby letters of credit of $2.0 million and

$3.3 million, respectively, and guarantees of $9.2 million and $9.8 million issued by its banks. The letters of credits and guarantees
were primarily for the Company's facility leases and contract performance obligations in the U.S. and Belgium, respectively. The open
standby letters of credit reduces the Company's unused borrowing capacity under the Credit Facility.

Litigation and Claims

The Company is involved in various legal matters and proceedings arising in the ordinary course of business. While these
matters and proceedings cause it to incur costs, including, but not limited to, attorneys’ fees, the Company currently believes that any

F-32

ultimate liability arising out of these matters and proceedings will not have a material adverse effect on the Company’s financial
position, results of operations, or cash flows.

Road Home Contract

On June 10, 2016, the Office of Community Development (the “OCD”) of the State of Louisiana filed a written administrative

demand with the Louisiana Commissioner of Administration against ICF Emergency Management Services, L.L.C. (“ICF
Emergency”), a subsidiary of the Company, in connection with ICF Emergency’s administration of the Road Home Program
(“Program”). The Program contract was a three-year, $912 million contract awarded to the Company in 2006. The Program ended, as
scheduled, in 2009.

The Program was primarily intended to help homeowners and landlords of small rental properties affected by Hurricanes Rita
and Katrina. In its administrative demand, the OCD sought approximately $200.8 million in alleged overpayments to the Program's
grant recipients, and separately supplemented the amount of recovery it sought in total to approximately $220.2 million. The State of
Louisiana, through the Division of Administration, also filed suit in Louisiana state court on June 10, 2016. The State of Louisiana
broadly alleges, and sought recoupment for the same claim made in the administrative proceeding submission before the Louisiana
Commissioner of Administration. On September 21, 2016, the Commissioner of the Division of Administration notified OCD and the
Company of his decision to defer jurisdiction of the administrative demand filed by the OCD. In so doing, the Commissioner declined
to reach a decision on the merits, stated that his deferral would not be deemed to grant or deny any portion of the OCD’s claim, and
authorized the parties to proceed on the matter in the previously filed judicial proceeding. On February 17, 2023, the Company
resolved all matters with the State of Louisiana related to the litigation and the Road Home program. The impact of this resolution was
not material to the Company's consolidated financial statements.

NOTE 21 - EMPLOYEE BENEFIT PLANS

Retirement Savings Plan

Effective June 30, 1999, the Company established the ICF Consulting Group Retirement Savings Plan (the “Retirement Savings

Plan”). The Retirement Savings Plan is a defined contribution profit sharing plan with a cash or deferred arrangement under Section
401(k) of the Internal Revenue Code. Participants in the Retirement Savings Plan are able to elect to defer up to 70% of their
compensation, subject to statutory limitations, and are entitled to receive 100% employer matching contributions for the first 3% and
50% for the next 2% of their compensation. Contribution expense related to the Retirement Savings Plan for the years ended
December 31, 2022, 2021, and 2020 was approximately $22.9 million, $19.0 million, and $18.1 million, respectively.

Deferred Compensation Plan

Certain key employees of the Company are eligible to defer a specified percentage of their cash compensation by having it
contributed to a nonqualified deferred compensation plan. Eligible employees may elect to defer up to 80% of their base salary and up
to 100% of performance bonuses, reduced by any amounts withheld for the payment of taxes or other deductions required by law.
Participants are at all times 100% vested in their account balances. The Company funds its deferred compensation liabilities by
making cash contributions to a Rabbi Trust at the time the salary or bonus being deferred would otherwise be payable to the employee.
The liability to plan participants is materially funded at all times and the plan does not have a material net impact on the Company’s
results of operations.

Employee Stock Purchase Plan

The Company has a 2006 Employee Stock Purchase Plan (“ESPP”) under which one million shares have been authorized for

issuance. The ESPP allows eligible employees to purchase shares of the Company’s common stock through payroll deductions up to
$25,000 per calendar year over six-month offering periods at a discount not to exceed 5% of the market value on the date of each
purchase period, and therefore the Company does not recognize compensation expense related to the ESPP. For the years ended
December 31, 2022 and 2021, employees purchased a total of 34,844 and 27,310 shares at an average purchase price of $91.84 and
$90.19, respectively. At December 31, 2022 and 2021, there were 584,972 and 619,816 shares remaining available for future
issuance.

NOTE 22 - EXIT ACTIVITIES

During the year ended December 31, 2022, the Company incurred charges related to: 1) the reduction and wind-down of certain

non-core commercial marketing businesses, and 2) the reduction of facilities utilized by the remaining elements of the commercial
marketing group. Specifically, these charges included the impairment of certain right-of-use operating leases and related assets
associated with exited facilities of $8.2 million (see Note 2 - Summary of Significant Accounting Policies - Long-Lived Assets), $4.8

F-33

million in other facility costs, recorded within indirect and selling expenses, and retention and severance of $2.3 million primarily
recorded within direct costs. During 2022, $1.3 million of retention and severance and none of facility costs were paid.

NOTE 23 - SUBSEQUENT EVENTS

Share Buyback Program

On November 15, 2022, the Company’s board of directors authorized and approved a plan to repurchase up to 180,000 shares of
the Company's common stock pursuant to Rule 10b5-1 (the “Plan”) of the current repurchase program. The Plan is effective January 3,
2023 through June 30, 2023. As of February 10, 2023, the Company bought 180,000 shares at a total cost of $18.1 million, or $100.70
per share, and completed the Plan.

Hedging Activities

Effective February 28, 2023, the Company entered into new floating-to-fixed interest rate swap agreements for an aggregate

notional amount of $75.0 million. These new swaps mature on February 28, 2028.

Dividend

On February 28, 2023, the Company’s board of directors approved a $0.14 per share cash dividend. The dividend will be paid

on April 13, 2023 to shareholders of record as of the close of business on March 24, 2023.

NOTE 24 - SUPPLEMENTAL INFORMATION

Valuation and Qualifying Accounts

Allowance for Credit Losses

Balance at beginning of period
Provision for credit losses
Write-offs, net of recoveries
Effect of foreign currency translation
Balance at end of period

Income Tax Valuation Allowance

Balance at beginning of period
Provision for income taxes - valuation allowance
Balance at end of period

2022

2021

2020

$

$

$

$

7,741
248
(1,782)
(95)
6,112

2022

7,048
559
7,607

$

$

$

$

7,616
10,912
(10,723)
(64)
7,741

2021

6,839
209
7,048

$

$

$

$

3,506
4,062
(41)
89
7,616

5,374
1,465
6,839

2020

F-34

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BOARD OF DIRECTORS 

Marilyn Crouther  
CEO & Principal, 
Crouther Consulting, LLC 

Dr. Srikant M. Datar 
Dean, Harvard Business School 
Harvard University 

Randall Mehl
President 
Stewardship Capital Advisors, LLC 

Scott Salmirs 
President and Chief Executive Officer 
ABM Industries Incorporated 

John Wasson  
Chair, President and Chief Executive 
Officer ICF International, Inc. 

Dr. Michelle A. Williams 
Dean, Harvard T.H. Chan School of 
Public Health Harvard University 

Cheryl W. Grisé 
Retired Executive Vice President 
Eversource Energy (f/k/a Northeast 
Utilities) 

Michael Van Handel 
Retired Executive Vice President And 
Chief Financial Officer Manpower 
Group 

TRANSFER AGENT  

INDEPENDENT AUDITOR 

INVESTOR CONTACT 

American Stock Transfer & Trust Co. 
6201 15th Avenue 
Brooklyn, New York 11219 
1-800-937-5449 

Grant Thornton LLP 
1000 Wilson Boulevard, Ste. 1400
Arlington, Virginia 22209 
1-703-847-7500 

Lynn Morgen/David Gold 
AdvisIRy Partners 
501 Madison Avenue, Floor 12A 
New York, New York 10022 
1-212-750-5800 

CORPORATE OFFICE 

ICF International, Inc. 
1902 Reston Metro Plaza 
Reston, Virginia 20190 
1-703-934-3600 
info@icf.com 

EXECUTIVE LEADERSHIP 

John Wasson  
Chair, President and Chief Executive 
Officer 

James C. Morgan 
Executive Vice President and Chief 
Operating Officer 

Barry Broadus 
Senior Vice President and Chief 
Financial Officer 

Andrea Baier  
Senior Vice President Europe and Asia 
Growth 

Anne Choate 
Executive Vice President Energy, 
Environment and Infrastructure 

Gene Costa 
Executive Vice President 
Administration 

James E. Daniel
Executive Vice President, General 
Counsel and Secretary 

John George 
Senior Vice President and Chief 
Information Officer 

Amira Hossain 
Senior Vice President Corporate 
Development 

Kristen Klovsky  
Senior Vice President Corporate Growth  

Mark Lee 
Executive Vice President and Chief 
Technology Executive 

Matt Maurer 
Senior Vice President and Chief 
Marketing Officer 

Caryn McGarry  
Executive Vice President and Chief Human 
Resources Officer 

Philip Mihlmester 
Executive Vice President Global 
Energy 

Sergio Ostria 
Executive Vice President Growth and 
Innovation 

Tobias Schaefer  
Senior Vice President Europe and Asia  

Dr. David Speiser 
Executive Vice President Corporate 
Strategy 

Robert Toth 
Senior Vice President Contracts and 
Administration 

Kris Tremaine  
Senior Managing Partner ICF Next

Jennifer Welham 
Senior Vice President Health, People 
and Human Services 

 
 
 
 
 
 
 
 
 
 
 
...

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